Every week, I hear it: "I'm going to wait until rates come back down to 3%." It sounds reasonable. After all, we saw sub-3% rates just a few years ago. Why not wait for the cycle to repeat?
Because the math doesn't support it. And the math never lies.
The Spread Problem Nobody Talks About
Here's what most buyers don't understand: mortgage rates aren't just about the Fed or the economy. They're about the spread between the 10-Year Treasury and mortgage-backed securities.
That 207 basis point spread is the cost lenders and investors demand to hold mortgage risk instead of Treasuries. And it's running hot.
Before COVID, the typical spread was 160-180 bps. In a healthy market, if the 10Y is at 4.00%, you'd expect mortgages around 5.60-5.80%. We're 30-40 bps above that—a tax on borrowers that didn't exist five years ago.
The Math That Kills the 3% Dream
Let's work backwards. For a 3.00% mortgage rate:
| Spread Assumption | Required 10Y Yield | Reality Check |
|---|---|---|
| 180 bps (normal) | 1.20% | Need 295 bps drop |
| 200 bps (current) | 1.00% | Need 315 bps drop |
| 220 bps (elevated) | 0.80% | Need 335 bps drop |
The 10-Year Treasury is at 4.15% today.
To hit 3% mortgages, the 10Y needs to fall 300 basis points. That's not a soft landing. That's not a mild recession. That's a full-blown economic crisis—think March 2020 panic, except sustained.
The last time the 10Y was below 1.0%, the global economy was in freefall, the Fed was buying everything that moved, and we were stacking bodies in refrigerated trucks. That's the environment required for 3% rates.
Is that really what you're waiting for?
Why Spreads Won't Save You
"Maybe spreads will compress," the optimists say. They won't. Here's why:
The Fed is a seller, not a buyer
Quantitative Tightening (QT) means the Fed is letting MBS roll off its balance sheet at $35B/month. No more backstop. No more price support.
Banks don't want MBS anymore
After Silicon Valley Bank's duration-mismatch blowup, regional banks retreated from mortgage securities. That demand isn't coming back.
Prepayment uncertainty is elevated
Investors can't model cash flows when everyone has a 3% mortgage they'll never refinance. That uncertainty commands a premium.
Spreads at 200+ bps aren't an anomaly—they're the new baseline.
The Inventory Trap
While you wait for rates that aren't coming, the supply picture is working against you.
That's up 30% from a year ago, but still 11% below pre-pandemic 2019 levels. Only 12 states have recovered to normal inventory. The rest remain undersupplied.
If rates do drop meaningfully—say to 5.5%—every sidelined buyer jumps back in. The 80% of homeowners locked into sub-4% mortgages still won't sell. Demand spikes. Supply stays constrained. Prices rip higher. You compete in a feeding frenzy instead of today's stable market.
You're not waiting for a better market. You're waiting to face worse conditions.
The Opportunity Cost Is Compounding
Median existing home price: $415,200 (October 2025), up 2.1% year-over-year.
Home prices have risen in 49 of the last 50 months. Every year you wait:
At 2% appreciation: That $415K home becomes $423K
At 3% appreciation: It becomes $428K
At 4% appreciation: It becomes $432K
A $400,000 home appreciating at 3% = $12,000/year in lost equity
That's equity you're forfeiting while waiting for a rate environment that requires economic catastrophe to materialize.
You can refinance the rate. You cannot refinance the purchase price.
The Bottom Line
What 20 Years in This Business Taught Me
I traded MBS through the 2008 collapse, the COVID panic, and the 2022-2023 rate shock. Here's what I know:
The people who build wealth in real estate are the ones who bought. Not the ones who timed it perfectly—there's no such thing. The ones who bought, held, and let time work.
Waiting for 3% is betting on economic disaster. And if you're right and that disaster comes, you'll have bigger problems than your mortgage rate.
Buy when you're ready, when the payment works, when the home fits. Marry the house, date the rate. Lock in today's prices and tomorrow's equity. Refinance when spreads normalize—and they will, eventually.
But 3%? That's not coming back without a crisis you don't want.
Stop waiting. Start building.
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