BiggerPockets Real Estate Podcast - Episode Summary

Episode Title: Will Mortgage Rates Fall Below 6%? Here’s What Could Trigger Low Rates
Release Date: March 6, 2025
Host: Dave Meyer, Head of Real Estate at BiggerPockets

In this insightful bonus episode of the BiggerPockets Real Estate Podcast, Dave Meyer delves deep into the fluctuating landscape of mortgage rates, addressing the pressing question on every real estate investor's mind: "Will mortgage rates fall below 6%?" Released on March 6, 2025, this episode offers a comprehensive analysis of current trends, economic factors influencing mortgage rates, expert opinions, and strategic advice for investors navigating this volatile market.

1. Current Mortgage Rate Trends

Dave begins by highlighting the recent shift in mortgage rates, noting a significant drop:

Dave Meyer [00:00]: "The mortgage rate roller coaster has taken yet another turn over the last couple of weeks, with the average rate on a 30-year fixed dropping from 7.25% down to 6.75% as of this recording."

This decline has sparked optimism among investors but also uncertainty about whether this is a temporary dip or the start of a downward trend.

2. Understanding the Drivers of Mortgage Rates

To provide clarity, Dave explains the two primary factors influencing mortgage rates:

Dave Meyer [00:00]: "It's about the yield on a US treasury and the quote, unquote spread."

• Yield on US Treasury: Represents the interest investors earn when lending money to the government through bonds.
• Spread: The difference between the yield on a bond and mortgage rates.

3. Insights from Logan Motashami

Dave references an article by Logan Motashami from Housing Wire, whom he regards as a trusted analyst:

Dave Meyer [00:00]: "Logan is such a pro, he does his own economic forecasting and he's basically just right a lot."

Logan's analysis suggests that mortgage rates have the potential to decrease further, contingent upon economic factors. He predicts the 10-year yield to fluctuate between 3.8% and 4.7% in 2025, indicating room for mortgage rates to dip an additional 0.4%.

Logan Motashami [Referenced Quote]: "Economic data has been consistently underwhelming of late. With the 10-year peaking earlier this year, the slide from 4.79 to 4.2% has been a relatively common move whenever economic data gets softer."

4. The Role of Economic Data

Dave emphasizes the impact of economic indicators on yields and, consequently, mortgage rates:

Dave Meyer [00:00]: "Yields rise when there's confidence and it falls when there is fear."

Logan posits that further decreases in yields—and thus mortgage rates—would likely require worsening economic conditions or a stock market downturn that drives investors towards the safety of bonds.

5. Mortgage Spread Dynamics

The episode delves into the concept of the mortgage spread:

Dave Meyer [09:02]: "There is a two and a half percentage point spread. Is that going to change? Is it going to get bigger?"

Historically, the spread hovers around 1.9%. However, due to uncertainties in 2022 and 2023, the spread expanded to 3%. Recent improvements have seen it contract to around 2.6%, aiding the reduction in mortgage rates.

Logan Motashami [Referenced Quote]: "Today's housing market would look entirely different if mortgage spreads hadn't improved in 2024 and in 2025."

Logan forecasts a modest improvement in spreads by approximately 0.27 to 0.41%, potentially lowering mortgage rates by the same margin without affecting bond yields.

6. Implications for Real Estate Investors

Dave discusses the potential scenarios and their implications for investors:

• If Economy Weakens: Mortgage rates could drop to as low as 5.75%, enhancing housing affordability. However, this scenario may coincide with negative effects such as stock market downturns, higher unemployment, and decreased housing demand.

Dave Meyer [09:02]: "If economic news sours more and yields fall... rates could go down to 5.75%."

• If Economy Strengthens: Rates might stabilize or rise, hovering in the mid to upper sixes, increasing borrowing costs but potentially reflecting a robust economy.

Dave advises against attempting to time the market based on these fluctuations. Instead, he recommends focusing on current market conditions and pursuing viable real estate deals without delay.

Dave Meyer [09:02]: "Do not spend your time dwelling on what could be in three or six months from now... If it works today, it's going to work in the near future."

7. Strategic Recommendations for Investors

Concluding the episode, Dave offers strategic advice:

• Do Not Wait for Perfect Conditions: The unpredictability of mortgage rates means that waiting could result in missed opportunities.
• Focus on Deal Viability: Ensure that real estate investments are sound based on current rates and market conditions.
• Prepare for Trade-offs: Recognize that favorable mortgage rates may come with economic downsides affecting other investment areas.

Dave Meyer [09:02]: "Concentrate on the here and now and not on that unknowable future."

8. Final Thoughts

Dave wraps up the episode by reinforcing the importance of proactive investment strategies amidst mortgage rate volatility. He encourages listeners to leverage current opportunities to advance their financial freedom through real estate.

Key Takeaways:

• Mortgage rates have decreased from 7.25% to 6.75%, with potential for further declines under specific economic conditions.
• Yields on US Treasuries and the mortgage spread are critical determinants of mortgage rates.
• Expert forecasts suggest rates could fall to 5.75% but caution against relying solely on downtrends due to economic uncertainties.
• Investors should prioritize current market opportunities over speculative timing based on future rate movements.
• Understanding the interplay between economic indicators and mortgage rates is essential for informed real estate investment decisions.

Notable Quotes:

• Dave Meyer [00:00]: "The mortgage rate roller coaster has taken yet another turn... will rates now go lower or is this just a temporary reprieve?"
• Logan Motashami [Referenced]: "Economic data has been consistently underwhelming of late... this has driven mortgage rates down over the course of 2025 so far."
• Dave Meyer [09:02]: "Do not spend your time dwelling on what could be in three or six months from now... If it works today, it's going to work in the near future."

This episode serves as a valuable resource for real estate investors seeking to understand and navigate the complexities of mortgage rates in 2025. Dave Meyer's analysis, combined with Logan Motashami's expert insights, provides a nuanced perspective on the factors influencing mortgage rates and strategic approaches to leveraging them for financial growth.