If you’re considering buying a home in Sioux Falls, keeping an eye on mortgage rates is a crucial part of your journey. Over the past few years, we’ve witnessed record lows, significant increases, and now a slight decline in mortgage rates. But what factors influence these rates, and how will they impact your home-buying plans in Sioux Falls? Let’s break it down.
Inflation and the Federal Reserve: While the Federal Reserve (Fed) doesn’t directly set mortgage rates, its actions play a crucial role. The Fed adjusts the Federal Funds Rate based on factors like inflation, the economy, and employment rates. As they address inflation concerns by raising the federal funds rate, it indirectly affects mortgage rates. Higher inflation and expectations of more rate hikes can push mortgage rates up. Conversely, if the Fed signals rate cuts and a slowdown in inflation, mortgage rates tend to trend down.
Over the past couple of years, the Fed raised the Federal Funds Rate to combat inflation, causing a corresponding increase in mortgage rates. The good news for Sioux Falls homebuyers is that experts predict a more favorable outlook for inflation and mortgage rates in the coming year. Danielle Hale, Chief Economist at Realtor.com, anticipates that “mortgage rates will continue to ease in 2024 as inflation improves.”
There’s even speculation that the Fed might consider cutting the Federal Funds Rate this year as inflation shows signs of cooling, although it hasn’t yet reached their ideal target.
The 10-Year Treasury Yield: Mortgage companies often look at the 10-Year Treasury Yield to determine the interest rates on home loans. When the yield rises, mortgage rates tend to follow suit, and vice versa. The 10-year Treasury bond yield serves as a benchmark for mortgage lenders.
Historically, the spread between the 10-Year Treasury Yield and the 30-year fixed mortgage rate has remained relatively consistent. However, recent trends suggest some divergence, providing potential room for mortgage rates to decrease. Keeping a close watch on the direction of the treasury yield can offer insights into where mortgage rates might head next.
What Does This Mean for Sioux Falls Homebuyers? As the Fed convenes to make decisions that could impact the economy, staying informed about mortgage rate changes is crucial for Sioux Falls homebuyers. To navigate these changes effectively and ensure a smooth home-buying process, having a team of professionals by your side is the best approach.
If you’re ready to explore the real estate market in Sioux Falls, connect with a trusted local real estate agent who can provide insights into the latest market trends and guide you through the home-buying journey. Remember, being well-informed empowers you to make confident decisions when it comes to securing your dream home in Sioux Falls.