Financing · Deep dive · October 2026
What waiting for lower mortgage rates actually costs
Rates are back above 7%, buyers are pulling back, and homes are sitting. The instinct is to wait. The problem with waiting for the perfect moment is that you only ever identify it after it has gone — and the thing you are waiting for is the same thing that will take away your negotiating room.
Typical 30-year rate
~7.5%
Around 7.25% for borrowers with perfect credit
One point costs you
$312
Per month, on the same $500,000 house
Buying power lost
$52,000
Same $3,000 budget, 6% versus 7%
Las Vegas inventory
7,000+
Homes on the market, sellers negotiable
Where rates actually are
A borrower with perfect credit is seeing something around 7.25%. The more common number is closer to 7.5%.
For context, here is how September moved, using the weekly 30-year fixed average:
| Week | 30-year fixed average |
|---|---|
| 3 September 2026 | 6.71% |
| 10 September 2026 | 6.76% |
| 17 September 2026 | 6.95% |
The Fed then raised its benchmark rate by a quarter of a percentage point in September, with a strong possibility of further increases ahead.
Which brings up the question Jim says he gets more than any other.
The Fed raised rates. What does that do to mortgage rates?
Not what most people assume. A quarter-point move by the Fed does not add a quarter point to mortgage rates. But the common rebuttal — that the Fed rate has nothing to do with mortgage rates — is wrong too. The honest answer sits between them, and it is worth understanding properly because it governs what happens next.
Three different rates, three different jobs
The federal funds rate is short-term. It is broadly what banks pay to borrow money, and it feeds most directly into short-term credit: credit cards, car loans. When the Fed raises it, banks are borrowing at a higher cost before they lend anything to you, and they need a spread on top to make the business work.
The 10-year Treasury has to pay more than that. If an investor can earn a short-term return with their money available again quickly, they will need a premium to lock it away for ten years instead. So the 10-year yield sits above the short-term rate, because it has to be attractive enough that anyone buys the bonds at all.
A 30-year mortgage has to pay more again, and for more reasons:
- The term is three times longer. Thirty years is a very long time to tie up money.
- The borrower can default. There is a house as collateral, but recovering it is not free or fast.
- The loan can vanish early. The owner sells, or refinances when rates fall, and the thirty years of interest the lender priced for never arrives.
Every one of those has to be priced in before an investor will buy mortgage-backed securities. Stack them up:
| Instrument | Illustrative rate | Why it sits there |
|---|---|---|
| Short-term / Fed funds | ~4% | Money back quickly, lowest risk |
| 10-year Treasury | ~5% | Ten years of commitment needs a premium |
| 30-year mortgage | ~7% | Longest term, default risk, prepayment risk |
Those figures are illustrative, chosen to show the shape of the ladder rather than to quote today's market. The relationship is the point: each step up in term and risk has to pay more, or nobody funds the next one.
When people argue the Fed rate's not the mortgage rate — well, it's not. But it definitely has a lot of effect on what it does.
The shorter version of this argument, written when the Fed cut and mortgage rates went up anyway, is in why mortgage rates don't follow the Fed.
The chain reaction higher rates set off
Rates do not move prices directly. They move them through a sequence, and knowing the sequence tells you where in it the market currently is.
- Higher rates mean higher monthly payments on the same house.
- Fewer buyers qualify at those payments.
- Demand weakens.
- Homes take longer to sell and inventory grows.
- Sellers compete with each other for a smaller pool of buyers.
- Buyers still in the market gain negotiating power.
Notice what is not in that list: prices collapsing. What actually happens is that prices adjust toward what buyers can afford, and the pressure comes out either as a lower price or as concessions.
Las Vegas is somewhere around step five and six right now. Over 7,000 homes on the market, sales slowed, homes sitting longer, and sellers paying closing costs, funding rate buydowns, negotiating repairs and covering buyer agent compensation. The October market report has the full numbers.
Price cut or concession: which one do you want?
There is a psychological layer to this that is worth exploiting rather than ignoring.
Some sellers are attached to a headline sale price and will give substantial concessions to protect it. Others take the opposite view — the net is the net, and they do not care whether it comes off the price or out of closing costs, as long as the figure they walk away with holds.
Which of those you are dealing with changes what to ask for. And which one benefits you depends on how you are buying: a cash buyer simply wants the lowest price, while a borrower may be far better off with a rate buydown and closing costs covered than with an equivalent reduction in price.
What one percentage point actually does
This is the part worth sending to anyone who says a point is a point.
Same house, different rate
A $500,000 home with 5% down, so a $475,000 loan:
$2,848
Monthly principal and interest at 6%
$3,160
Monthly principal and interest at 7%
$312 more every month, on exactly the same house at exactly the same price. Over thirty years that is more than $112,000 in additional payments.
Same budget, different house
Run it the other way, which is how buyers actually experience it. You have $3,000 a month for principal and interest, and 5% to put down:
| Rate | Loan it supports | Home price you can buy |
|---|---|---|
| 6% | $500,375 | ~$526,000 |
| 7% | $450,923 | ~$475,000 |
| Buying power lost | ~$52,000 | |
The house didn't become more expensive overnight. The cost of financing it did.
That is why demand can change so fast in either direction. It is also why the arithmetic cuts both ways: the same mechanism that removed $52,000 of buying power at 7% hands it back if rates fall — to every other buyer at the same time.
These are principal and interest only. Taxes, insurance and HOA sit on top, and the full picture is in what a Las Vegas home actually costs per month.
Adjustable rate mortgages are back, and the risk has not changed
ARMs took the blame for the 2008 crash and spent years out of favour. They are being looked at again, for an obvious reason: they lower the payment for the first two, three or sometimes seven years.
There is nothing wrong with considering one. The problem is almost never the product. It is the assumption bolted onto it.
The reasoning usually runs: take the lower payment now, rates will come down, refinance before it adjusts. That plan rests entirely on something the borrower has no control over.
This is not hypothetical. Buyers who took 2/1 ARMs around three years ago on exactly that logic are now past the fixed period. Rates did not come down. The payment adjusted. They qualified for it, so technically they can afford it — but qualifying and living comfortably are different things, and the October market report notes short sales running at 361 so far this year against 254 for all of 2025.
Look at the payment that you will eventually be responsible for, not just the lower payment today.
The question to ask before signing: if I never get the chance to refinance, can I adjust my spending and still cover this payment comfortably? If the answer needs a rate forecast to become yes, it is a no.
How the various loan structures compare is in Las Vegas loan programs.
The bottom will not send you an email
Everybody wants to buy at the bottom. The difficulty is structural: there is no alert, no announcement, and no way to identify a bottom except in hindsight, once prices have already turned and you are looking backwards at it.
Jim has bought before a bottom and kicked himself for it. His counterpoint is that the other side of a bottom is a completely different market to negotiate in — and by then the conditions that made the deal possible are gone.
What actually happens when rates fall
This is the scenario people are waiting for, so it is worth being clear about what it contains:
- Buyer confidence returns, often before the data confirms anything.
- More buyers enter the market and competition increases.
- Prices start rising again.
- Inventory drops as demand absorbs it.
- Closing cost contributions and rate buydowns disappear.
- Multiple offers come back.
So the question becomes sharper. If you are waiting for rates to come down, what is your plan for when prices go up? If you are waiting for prices to come down, how far do they need to fall before you will actually act? If you are waiting for the bottom, how will you recognise it? And underneath all three: will you be financially ready when it happens?
Would you rather have a slightly higher interest rate but get a great purchase price and seller concessions? Or a lower rate while competing with ten other buyers?
None of this is an argument for buying blindly into a falling market out of fear of missing a bottom. It is an argument that you do not need to predict the bottom for a deal to make sense. Know your numbers — price, payment, terms — and when something in front of you meets them, you are deciding on a property rather than forecasting a market.
The same question from the opposite direction is in is it too late to invest in real estate.
Your situation decides the answer
Jim draws a line here between the two hats he wears. As an agent he would like to help you transact. As an investor, his read is that general advice is nearly useless because the right move is entirely dependent on where you are starting from.
| Where you are | What this market means for you |
|---|---|
| 40s to 60s, approaching retirement, with savings, investments, rental properties and capital to deploy | Pay close attention. This is the position these conditions are built for. |
| 20s or 30s, still building the financial foundation | Stop watching the market like a crypto chart. Get your finances in order so you can act when the opportunity arrives. |
| A maturing CD or similar — say $400,000 waiting to be redeployed | A genuinely different decision from someone assembling a 3.5% down payment for a first home. |
| Already established and adding real estate to a portfolio | This is where Jim thinks the opportunities are on the horizon. |
The CD scenario has its own full comparison in your CD is maturing and rates are falling, now what.
Why a slow market is an investor's market
Periods like this do not create opportunity because everything suddenly became cheap. They create it because fewer people are willing or able to buy. What you get in exchange for accepting the higher financing cost:
- Less competition from other buyers.
- More motivated sellers.
- Price reductions already on the table.
- Seller concessions as standard rather than as a favour.
- Room to negotiate the terms, not just the price.
- Time to do proper due diligence instead of deciding on the spot against five other offers.
That last one is undervalued. The numbers still have to work: realistic rent, cash flow, HOA, taxes, insurance, repairs, a vacancy allowance, the actual cost of your financing, and a realistic resale value. In a competitive market you are guessing at those under time pressure. Right now you can actually check them.
The walkthrough version is in how to evaluate a rental property.
If the opportunity arrived tomorrow, could you take it?
This is the strongest part of the video, and it reframes the whole question. Everyone says they are waiting for an opportunity. Very few are preparing for one.
The people who are able to take advantage of this market did not start preparing a week before the opportunity showed up.
If the answer is no, the useful question is what changes over the next six months:
- Down payment and reserves. Do you need to save more, and is the money somewhere you can actually reach? If you want to move quickly, it should not be locked in another CD.
- Credit. Does it need work? That is a months-long job, not a weekend one — see how to improve your credit to get a mortgage.
- Debt. Is there a balance that needs paying down before your ratios work?
- Income. Does it need to increase or stabilise? For self-employed and 1099 borrowers the question is sharper: after all your deductions, what does your income look like on paper, which is the only version a lender uses. That is covered in the self-employed mortgage guide.
- Existing holdings. Does a 1031 exchange come into play?
- Target return. Is there a specific rate of return you need before you will pull the trigger?
- A defined goal. Something concrete, such as $350,000 to invest and a single-family home at that number. Harder to find today, but if prices keep easing it comes into range.
- Neighbourhoods and prices. Do you know where you want to buy and what you will pay there?
- An agent actively watching inventory against your criteria and telling you when something fits.
- A lender relationship already in place, not started when you find the house.
What Jim would buy today
Asked what would make him act in this market:
- A property that has been sitting, where the seller has already reduced the price more than once. That is where the negotiation is.
- Numbers that work at today's rates, not at a hoped-for future rate.
- A seller contributing to closing costs or a rate buydown.
- For an investment: verified actual rents, and confidence he can comfortably hold it.
- Below market with value-add potential, where renovation could move the value.
- Or a location with long-term appreciation potential, such as Summerlin.
What he is personally shopping for right now is a single-storey house, preferably in a gated community, close to where he eats and plays and with easy airport access — a future downsizing home, rented out in the meantime, bought in this market rather than twenty years from now.
I don't want to buy something that only works if I assume rates are going to drop or the property is going to appreciate a certain amount.
If rates fall later and a refinance becomes possible, that is upside. It is not the plan.
The honest summary
Nobody here is saying this is the bottom, or that now is the perfect time to buy. What is true is narrower and more useful: higher rates are putting pressure on buyers, inventory is increasing, and sellers are unusually negotiable. That combination creates opportunity for people positioned to use it.
Your job is not to predict the market. It is to know your numbers, know what you are looking for, and be ready when something that fits appears.
Disclosures
Rate figures on this page describe market averages for the period discussed and illustrative examples used to show how the different rates relate to one another. They are not offers, quotes, or rates available to any particular borrower, and no annual percentage rate was stated in the source. Payment calculations assume a 30-year fixed loan and cover principal and interest only; taxes, insurance, HOA dues and mortgage insurance are additional.
Nothing here is financial, tax, legal or lending advice. Loan products, including adjustable rate mortgages, carry terms and risks specific to each borrower and should be reviewed with a licensed lender before any commitment.
Jim Fong is a licensed Nevada real estate agent who would represent a buyer or seller in a resulting transaction, and is himself an active buyer in this market — he describes above the type of property he is personally looking to acquire.
Common questions
If the Fed raises rates by a quarter point, do mortgage rates go up by a quarter point?
No. The federal funds rate is a short-term rate that governs what banks pay to borrow, and it feeds most directly into short-term credit such as credit cards and car loans. A 30-year mortgage is priced off long-term money, which tracks the 10-year Treasury and the mortgage-backed securities market. The two are connected but not locked together, so the Fed can move a quarter point and mortgage rates can move more, less, or in the opposite direction. The Fed rate is not the mortgage rate, but it is wrong to say it has no effect.
Why is a 30-year mortgage rate higher than the 10-year Treasury yield?
Because investors have to be paid more to take more risk for longer. Locking money up for ten years requires a premium over lending it short term, which is why the 10-year yield sits above the Fed funds rate. A 30-year mortgage asks for more again: the term is three times longer, the borrower can default, and the loan can disappear early if the owner sells or refinances, cutting short the interest the lender expected. Each of those risks has to be priced in for anyone to want to buy mortgage-backed securities at all. Stack them up and a roughly 4% short-term rate and a 5% 10-year can sit alongside a mortgage around 7%.
How much buying power do you lose when mortgage rates rise one percent?
Around 10% of your purchase price. On a budget of $3,000 a month for principal and interest with 5% down, a 6% rate buys a home of about $526,000. At 7% the same payment buys about $475,000. That is roughly $52,000 of purchasing power gone, with no change in any house or any price. Looked at from the other direction, a $500,000 home with 5% down costs about $2,848 a month in principal and interest at 6% and about $3,160 at 7%, a difference of $312 every month for thirty years.
Is an adjustable rate mortgage a good idea when rates are high?
There is nothing wrong with looking at one, and they are being used again because they lower the payment for the first two, three or seven years. The danger is not the product, it is the assumption attached to it. Most people taking an ARM in a high-rate market are planning to refinance before it adjusts, and that plan depends on rates falling, which no borrower controls. Buyers who took 2/1 ARMs three years ago on exactly that reasoning are now facing the adjustment because rates did not come down. Before signing, work out the payment you will eventually be responsible for, not the one you start with, and ask whether you could carry it comfortably if no refinance ever becomes available.
Should I wait for mortgage rates to drop before buying a house?
It is worth asking what you expect to happen when they do. Lower rates bring buyers back, and returning demand pushes prices up, drains inventory and removes the concessions sellers are currently offering. Closing cost contributions, rate buydowns and negotiating room tend to disappear together, and multiple offers return. You might secure a lower rate and pay more for the house while competing against other buyers for it. The honest comparison is not today's rate against a future rate, it is today's whole transaction against a future whole transaction.
How do you know when the housing market has hit the bottom?
You do not, until afterwards. There is no alert and no announcement; the bottom is only identifiable once prices have started rising again and you are looking back at it. That is an argument for a different approach rather than for paralysis. Decide what price, payment and terms work for your situation, and act when a specific deal meets them. That is a decision about the property in front of you rather than a prediction about the market, and it does not require you to be right about timing.
What should an investor do to prepare for the next buying opportunity?
Everything that takes months rather than days, because the people who act on an opportunity did not start preparing the week it appeared. That means savings for the down payment and reserves, credit work, paying down debt that affects your ratios, and stabilising documented income, which matters especially for self-employed and 1099 borrowers whose income on paper after deductions is what a lender actually uses. It also means deciding your target return, the neighbourhoods you want and the price you will pay, keeping cash liquid rather than locked in a CD, sorting out whether a 1031 exchange applies, and having both a lender relationship and an agent watching inventory against your criteria.
Get the numbers before you need them
Whether you are buying now, in six months or next year, the preparation is the same and it takes longer than the opportunity lasts. We can run the payment scenarios, compare financing structures, and work out what the numbers look like over time for your situation — so that when something fits, you are deciding rather than scrambling.
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Jim Fong · NV license BS.0068736 · The Jim Fong Group at Real Broker · 702-997-2050