What’s Really Driving Mortgage Rates and Home Prices in Orange County?

By Danae Aballi-Mecham

Danae Aballi-Mecham is a long-time real estate industry veteran. She has worked in various positions in the industry having grown from an independent real estate agent to running a team of 5 top producing agents.

Many people believe the Federal Reserve sets mortgage rates, but that’s not how it works. This common misunderstanding causes confusion and missed opportunities for both buyers and sellers. Knowing what actually moves mortgage rates can help you make smarter decisions in today’s market.

Here’s a quick breakdown of what really drives rates:

Mortgage rates move with the 10-year Treasury bond. When the Fed raises or lowers interest rates, it affects short-term borrowing like credit cards, auto loans, and home equity lines of credit. Mortgage rates are different. They follow the 10-year U.S. Treasury bond instead.

Most homeowners keep their mortgage for around ten years before selling or refinancing, which is why lenders use the 10-year Treasury as their guide. When the bond yield rises, mortgage rates rise. When it drops, rates usually fall. Even if the Fed changes its rate, your mortgage rate might not move the same way.

Lenders add their own spread. Once lenders look at the 10-year Treasury yield, they add about 1.5% to 2% to cover risk, loan servicing costs, and profit margins.

For example, if the 10-year Treasury yield is 4.5%, that usually means mortgage rates will fall between 6% and 6.5%. Rates also change daily based on inflation, job reports, and investor confidence. It’s not what the Fed says that drives rates, but how the market reacts to new data.

What does this mean for buyers? For buyers, small changes in mortgage rates can make a big difference. When rates dip even slightly, demand in Orange County jumps, especially in high-demand areas like Irvine, Laguna Beach, and nearby coastal markets.

If you’re waiting for the “perfect” rate, that could actually cost you more. When rates fall, more buyers enter the market, and prices tend to rise. Sometimes buying now at today’s rate and refinancing later makes more sense than waiting and paying more for the same home. Acting early can help you secure a property before competition increases.

What does this mean for sellers? For sellers, understanding how rates affect buyer behavior can help you plan your strategy. When rates are higher, buyers tend to take longer and negotiate more. When rates fall, they move faster and are often willing to pay more for the right home.

If you’re thinking about selling, watch for rate trends. Even a small dip can create a rush of motivated buyers. Pricing your home right and listing at the right time can help you attract strong offers and sell faster. You can’t control the bond market, but you can control your timing and preparation. If you’re buying, compare what your monthly payment looks like at different rates. If you’re selling, keep an eye on how changes in rates affect local activity.

The Fed doesn’t set mortgage rates. The market does. And in Orange County, even small rate changes can impact your buying power or your home’s value. If you’d like to understand how current rates could affect your next move, call or text me at 949-216-8565 or email me at danae@danaeaballi.com. I’ll help you review your numbers and create a plan that fits your goals in today’s market.