Mortgage rates just hit their lowest level since February 2023, sitting right around 6%. And the moment that hit the news cycle, my phone started ringing. The reaction is always the same: Is this the start? Should I wait? Are rates about to go a lot lower?

These are fair questions. But if you misread why rates moved, you'll make the wrong decision with what could be one of the biggest financial choices of your life. So before we talk about what comes next, we have to start with what actually happened.

Why Mortgage Rates Dropped — And Why It Matters That You Understand This

Rates did not fall because inflation suddenly collapsed. They didn't fall because the economy hit the brakes hard. What actually moved the needle was a very specific, mechanical event: the Trump administration directed Fannie Mae and Freddie Mac to purchase approximately $200 billion in mortgage-backed securities.

That is not a small policy tweak. That is direct demand injected into the mortgage-backed security market — and when you flood that market with demand, yields compress. When yields compress, mortgage rates improve. That's just how the plumbing works.

Here's where it gets more nuanced. In the years following COVID, lenders were demanding significantly more yield over Treasuries because of volatility, prepayment risk, regulatory headaches, and general market uncertainty. That spread — the gap between mortgage rates and the 10-year Treasury — blew out to over 3% at one point. Historically, that spread runs closer to 1.6% to 1.8%. When that wave of mortgage-backed security demand came in, spreads compressed back to a more normal range, roughly 1.8% to 1.9%.

That normalization alone explains most of the drop in rates we've seen.

The Fed, Rate Cuts, and What's Already Priced In

This is where I see the most confusion among buyers and homeowners. People hear "two rate cuts expected this year" and immediately assume that means mortgage rates are heading meaningfully lower. But that's not how bond markets work.

The Federal Reserve does not control mortgage rates directly. They influence broader financial conditions, but mortgage rates trade off expectations — expectations about inflation, economic growth, global capital flows, and risk appetite. The market is constantly looking six to twelve months ahead, pricing in what it thinks is coming before it actually arrives.

Right now, the market expects two rate cuts this year. The first was originally anticipated in June, but stronger-than-expected economic data pushed that out to July. The second is expected around October. Here's what most people miss: those two cuts are already baked into current mortgage rates. The market has already moved in anticipation of them.

If you're sitting on the sidelines thinking, "I'll wait for the July cut and rates will drop," understand that unless something materially changes between now and then, the impact of that cut is already reflected in today's rates. Markets move on changes in expectations, not confirmation of what's already expected.

What Would Actually Push Rates Lower From Here?

For rates to fall meaningfully from the current 6% level, one of two things would need to happen:

• Inflation breaks lower — fast. If CPI and PCE both start printing closer to 2% for multiple consecutive months, the bond market would move ahead of the Fed. You could see the 10-year Treasury drop and mortgage rates drift into the mid-to-high 5% range. But that requires confirmed, repeated official data — not one good print.
• Employment cracks — hard. If unemployment rises quickly, the Fed would likely accelerate cuts, the bond market would rally sharply, and mortgage rates would follow. But that's not where we are. Right now, we're seeing the labor market cool, not collapse.

Cooling and cracking are very different things. Cooling allows the Fed to move gradually. Cracking forces aggressive, emergency-style cuts. The current environment looks like the former — and gradual policy shifts don't create dramatic moves in mortgage rates.

What About Inflation Right Now?

Inflation has improved meaningfully. CPI is currently running around 2.4% year-over-year, which represents real progress. But PCE — the Fed's preferred inflation gauge — is still closer to 2.9%. Core measures remain sticky. That combination doesn't give the Fed a clean runway to move aggressively.

The Fed is not going to respond to alternative inflation metrics or one month of favorable data. They move on confirmed, repeated official readings. Until those readings get convincingly to 2% and stay there, policy will remain deliberate and measured.

Inside the Fed itself, there's a genuine split. Some members look at the data and say policy is already restrictive enough — if they don't cut soon, they risk overtightening into a slowdown. Others are focused on not repeating the mistake of keeping policy too loose for too long, which risks a second wave of inflation. That division doesn't produce dramatic moves. It produces compromise. And compromise right now looks like two measured cuts, not six.

The New Fed Chair: Does It Change Anything for Mortgage Rates?

There's a widespread assumption that because the incoming Fed chair was selected by an administration that has publicly favored lower rates, mortgage rates are about to fall automatically. That assumption overlooks some important history.

Kevin Warsh has historically been critical of keeping monetary policy too loose for too long. He's spoken out against prolonged balance sheet expansion and continued mortgage-backed security purchases during the pandemic. If anything, a more hawkish stance on balance sheet management could lead to less support for mortgage-backed securities — and if that demand fades, spreads could widen again.

Wider spreads mean higher mortgage rates, even in a stable inflation environment. So assuming a leadership change automatically equals cheaper money is a mistake that ignores the actual mechanics of how mortgage rates work. The bond market watches credibility, not personalities. And credibility is earned through consistent, data-driven action — not rhetoric.

What This Means for Buyers and Sellers in Orange County and Huntington Beach

Let me be direct about what the current environment looks like when you put all the pieces together:

• Spreads have normalized — the easy compression is already done.
• Two rate cuts are priced in — the market has already moved on these.
• Inflation is improving but not resolved.
• Employment is softening but not breaking.
• Fed policy will be gradual and data-dependent.
• Leadership uncertainty adds volatility, not clarity.

That combination doesn't point to rates falling another half a point in a straight line. It points to a range-bound environment with volatility. Rates could dip to 5.85%. They could tick up to 6.25% or 6.35%. But without a clear catalyst — meaningful breaks in inflation or employment — you're not going to see a straight-line move to 5.5% or 5.75%.

The Mistake I See Buyers Make Over and Over

I talk to buyers in Orange County and Huntington Beach every week who are delaying major life decisions waiting for that one perfect rate. And I understand the impulse. When rates hit a three-year low, it feels like momentum. It feels like the beginning of something. Human nature wants to project the recent trend forward indefinitely.

But here's what actually tends to happen. Rates dip, people hesitate. Rates tick up, people feel regret. Rates dip again, people hesitate again. And the cycle continues while life moves forward and property values in Orange County keep rising.

The more useful question isn't "Are rates going to 5.75% next month?" The more useful question is: Does this payment make sense for my life and my timeline?

The Honest Range-Bound Outlook

I want to be clear: I'm not saying rates can't go lower. They absolutely can. But the burden of proof right now is on the data to force that move. And until that proof shows up in consecutive months of meaningfully lower inflation or a significant deterioration in employment, we're likely grinding sideways with volatility.

The most defensible outlook right now puts rates in a range between 6% and 6.5%, with the risk skewing slightly to the upside rather than the downside. Not dramatically higher — but slightly more likely to edge up than to collapse.

Anyone who tells you with certainty that rates are about to fall sharply is guessing. Anyone who tells you with certainty that rates are about to spike is also guessing. The honest answer — and the one I'll always give you — is that we're in between major cycles. And in between cycles, boring is usually what you get.

What This Means for the Orange County and Huntington Beach Market Specifically

Orange County real estate has always operated with its own dynamics layered on top of the national picture. Inventory here remains constrained. Demand from high-income households — many of whom are less rate-sensitive than the national average — has been persistent. Properties in Huntington Beach and throughout coastal Orange County haven't experienced the price corrections that softer inland markets saw when rates climbed.

What that means in practical terms: buyers who are waiting for a dramatic rate drop to make homes dramatically more affordable may be waiting for a catalyst that doesn't arrive — while the properties they want keep appreciating in the background.

That doesn't mean you rush into a purchase that doesn't make financial sense. It means you have a clear-eyed view of the environment and make decisions based on your actual situation — timeline, income, equity goals — rather than on the hope that rates will do what you need them to do on your schedule.

For sellers in Huntington Beach and Orange County, the rate environment still matters. Buyer purchasing power is higher today than it was at the peak of the rate cycle, and that supports demand. But the market isn't flooded with buyers the way it was in 2021. Pricing strategy and presentation still matter. The buyers who are active right now are sophisticated and doing their homework — price accordingly.

Practical Takeaways If You're Buying, Selling, or Refinancing Now

If you're buying: Evaluate whether the payment at today's rates fits your life. Build in a refinance plan for the future — not because rates are guaranteed to fall, but because if they do, you want to be positioned to take advantage. The opportunity cost of waiting in a low-inventory market is real.

If you're selling: Don't wait for rates to drop before listing. Lower rates tend to bring more buyers into the market — but they also bring more competing inventory. The current window, where buyers are active but seller competition is still relatively low, is worth taking seriously.

If you're refinancing: If you're currently holding a rate meaningfully above 6.5%, the math may already be there. Run the numbers with a trusted lender — not a headline — and make a decision grounded in your break-even timeline.

Final Thought: Boring Is Not Bad

Markets in between major cycles tend to feel frustrating because they don't have a clean narrative. Rates aren't dramatically falling. They're not dramatically rising. They're oscillating in a band, reacting to data, and requiring patience from buyers and sellers alike.

But boring markets still move. Life decisions still get made. And the buyers who succeed in environments like this aren't the ones who called the rate bottom perfectly. They're the ones who understood their situation clearly, made a decision grounded in their own financial reality, and moved forward with confidence.

That's the approach I bring to every client conversation in Orange County and Huntington Beach. If you want to have that conversation, I'm here.