A month ago, the consensus in real estate was that rate cuts were coming. Hold tight and the math gets better. That story has changed.
On May 22, Federal Reserve Governor Christopher Waller, a permanent voting member of the FOMC, called for removing the Fed's "easing bias" from its policy statement. In plain language, the Fed had been signaling that its next move would be a cut. Waller said that signal needs to go. A hike is now equally on the table. Bond markets moved that day and have not fully recovered since. Markets are now pricing in roughly a 50% probability of a Fed rate hike by December.
That shift did not happen in isolation. The 10 year Treasury yield touched a 16 month high of 4.68% on May 19 before pulling back to 4.45% today. The 30 year fixed mortgage rate sits at 6.53%, roughly two thirds of a point above the lows of February. The path that was supposed to make buying easier has not materialized.
Today's Data Did Not Settle the Debate. It Deepened It.
This morning brought a wave of economic releases that, taken together, illustrate exactly why the Fed is stuck. Here is what came in:
| Release | Actual | Read |
|---|---|---|
| Headline PCE (YoY) | 3.8% | Highest since May 2023 |
| Core PCE (YoY) | 3.3% | Highest since Oct 2023 |
| Core PCE (MoM) | 0.2% | Below 0.3% forecast |
| Initial jobless claims | 215K | Highest in over a month, still healthy |
| New home sales (Apr) | 622K | Down 6.2%, well below forecast |
The headline PCE number, which is what most news outlets will lead with, hit 3.8% year over year. That is a multi year high and exactly the print the hawks at the Fed will point to. But the monthly core PCE came in softer than expected at 0.2%, which is the data point the doves will emphasize. Translation: the underlying inflation trend may actually be cooling, even though the headline numbers look hot because of energy prices tied to the Iran conflict.
Jobless claims at 215,000 were the highest in over a month, but still consistent with a healthy labor market. There is no crack in employment that would force the Fed to cut.
The most striking number for our market was new home sales: down 6.2% in April to an annualized 622,000, well below the 660,000 economists expected. Months of supply for new builds jumped to 9.4. A balanced market is typically 4 to 6 months. National new construction is sitting.
Bond markets read the mix as mildly dovish on net, which is why the 10 year fell to 4.45% today rather than continuing to rise. But the data did not resolve the policy debate. It deepened it. The Fed now has evidence to support either path, and that uncertainty is exactly what keeps the 10 year volatile and mortgage rates elevated.
Why the 10 Year Treasury Is the Number That Matters
There is a common misconception that the Fed sets mortgage rates. It does not. The Fed controls the overnight lending rate between banks. Mortgage rates are priced off the 10 year Treasury yield, which reflects what bond investors expect inflation and economic growth to look like over the next decade.
When the Fed signals it may raise rates, it tells bond investors that inflation is being taken seriously and that money will stay expensive longer. That pushes the 10 year up. When the 10 year goes up, mortgage rates follow, typically running two to two and a quarter percentage points above the Treasury yield. Today the 10 year is at 4.45% and the 30 year fixed is at 6.53%, which is right in that historical range.
If the Fed follows through on a hike later this year and the 10 year moves toward 5%, a buyer in the market would be looking at a mortgage rate closer to 7% or above.
What That Looks Like for a Buyer in 92130
Carmel Valley single family homes are averaging around $855 per square foot. A typical purchase in the 92130 market lands between $1.2M and $1.6M. Here is what the payment math looks like at different rate scenarios on a $1.4M purchase with 20% down, a $1,120,000 loan:
| 30 Year Rate | Monthly P&I | vs. Feb Low |
|---|---|---|
| 5.87% (Feb 2026 low) | $6,622 | — |
| 6.53% (today) | $7,101 | +$480/mo |
| 7.25% (post hike scenario) | $7,640 | +$1,018/mo |
The $1,018 monthly difference between the February low and a post hike scenario is not abstract. Over twelve months it is over $12,000. Over five years it is over $61,000 in additional interest before any refinancing opportunity.
The window that opened in February may have been the window. When the 30 year rate briefly touched 5.87%, it was the first time in over two years that qualified buyers were within reach of a sub 6% mortgage. That window lasted weeks before the Iran War drove rates back up. With the Fed now signaling a possible hike and inflation prints still elevated, a return to those levels in 2026 looks increasingly unlikely.
What the 92130 Market Is Doing Right Now
The national housing data tells one story. The Carmel Valley market tells a different one.
Nationally, new construction is sitting. Months of supply jumped to 9.4 in April, more than double a balanced market. New home sales fell 6.2% in a month when they should have been accelerating into the spring buying season. Builders are offering incentives and the buyers are not showing up.
In 92130, well priced single family homes are still going under contract in roughly 21 days. Prices per square foot have been stable around $855 to $870. The market has not collapsed under the weight of higher rates. It has tightened.
What has changed is the composition of buyers. Inventory is up about 24% year over year across San Diego. Days on market are running longer than last year by as many as two weeks in some neighborhoods. That means more choice and less competition, but it does not mean prices are falling or that sellers are desperate. The homes sitting are the ones that are overpriced. The homes priced right are moving.
This is the key local insight today's national data obscures. Carmel Valley demand is structural: top public schools, proximity to coastal employment hubs, limited new construction, and a buyer pool that is largely cash strong and dual income. When national new build buyers walk away because of affordability, well located resale markets like 92130 behave differently.
What This Means If You Are Watching From the Sidelines
The calculus has changed. Six months ago the reasonable bet was that patience would be rewarded with lower rates. That bet has not paid off, and the Fed's posture today makes it harder to justify.
Rates can still come down. Inflation can ease. A ceasefire in Iran could hold and bond markets could calm. Today's softer core PCE print is a small piece of evidence in that direction. None of that is off the table. But the base case has shifted from "cuts are coming" to "nobody knows." In fixed income markets, uncertainty like this gets priced into yields immediately, and yields drive what a buyer pays every month.
If you are a family in San Diego thinking about buying in 92130 in the next six to twelve months, today is a reasonable day to get serious about the numbers. Not because of urgency for its own sake, but because the path that was supposed to make this easier just got less clear.
I look at this market every day from both sides, as someone who trades fixed income professionally and as a Carmel Valley resident and Realtor. If you want to run the payment math on a specific price point, I am happy to do it.