Just as things were beginning to thaw out showing a path forward, the US entered into a war which spiked the price for barrel of oil to $111 which was $72 a month ago. Oil passes directly to transportation, food production, construction, consumer services, and manufacturing. In other words, everything.
When prices of goods go up, that’s inflationary. As we’ve discussed, Treasury Bonds which control mortgage rates do not like inflation causing the 10 Year Bond yield increase to the same level as of July 2025. Mortgage rates went up with them as well, plus the Federal Reserve held their interest rate because of inflationary pressures.
What will happen in the short-term next 1-6 months
Oil and gasoline prices will remain elevated, causing most consumer goods to increase in price. Since the economy is remaining stable, the FED is mostly concerned about inflation, so anticipate higher mortgage and borrowing rates for longer.
Buyers: If you’re a buyer, this is a great opportunity to purchase property from motivated sellers.
Sellers: You can sell your property at a fair market price, not a discount fire sale. If you’re not in a rush or don’t need the money, then my recommendation is to hold on until the market has more clarity, not necessarily lower rates. Although, if there’s a property to exchange into, there’s a buyer if priced to market.
What will happen from July – End of year 2026?
Keep in mind there’s a new Federal Reserve Chairman being elected. If the war persists and they’re not able to bring down oil prices and it leads to layoffs, I anticipate that the FED will be forced to lower the Funds rate to spur economic activity.
They’d run the risk of runaway inflation. Although our consumption is based on oil production, high gas prices act as a hedge against consumer spending on non-essential goods or services.
What to expect?
Anticipate higher prices for oil, gas, electrical, materials, food, labor, and travel leading to longer for higher mortgage rates.
Even when mortgage rates eventually make their way down, the biggest competitor to the real estate market is the stock market. Last year, the weighted S&P 500 earned between 14-16% making it hard for an investor to justify pulling money from stocks to purchase a 6.5-8% cap rate deal.
Until there’s sustained losses or incredible volatility in the stock and equities market, investment sales will thaw out and transact only when there’s legitimate need.
I love talking all things real estate.
Adrian Del Rio, PCG Commercial, Broker & Investor