Santa Barbara Real Estate Market Update For November 2025

Monthly Mortgage insights from Jeff Bochsler of Rate

The Fed’s Latest Move: What Happened & Why It Matters

The Federal Reserve meets every six weeks to evaluate economic conditions and determine whether changes to the Federal Funds Rate are needed. Their decisions are guided by a dual mandate:

• Control inflation (targeting below 2%)
• Support maximum employment

While 19 Fed leaders participate in the discussions, only 12 voting members ultimately decide the outcome.
At the most recent meeting:

• 9 members voted to cut rates by 0.25%
• 1 member pushed for a larger cut
• 2 members voted for no cut

The result was a 0.25% reduction, bringing the Federal Funds Rate to a range of 3.50%–3.75% (the Fed always operates within ranges). This context helps explain what we’re seeing now — and what’s likely ahead — for mortgage rates.

Immediate Mortgage Rate Reaction

Mortgage rates responded slightly positively to the Fed’s announcement.

• Average 30-year fixed rates moved from 6.35% before the announcement
• Down to approximately 6.26% the following day
• A modest improvement of 0.09%

According to Mortgage News Daily, rates remain firmly within a very tight 75-day range:

• Low: 6.13%
• High: 6.38%
• Mid-range: ~6.25%–6.30%

In short, rates moved — but not meaningfully enough to break out of their current band.

Why Rates Aren’t Breaking Out (Yet)

The Fed said or did nothing at this meeting to signal a near-term breakout in mortgage rates.

Expectations remain that:

• Rates above 6% and below 6.5% are likely where we’ll stay
• This range could persist for another 3–6 months

Why? Inflation remains stubbornly close to 3%, not the Fed’s 2% target. As a result, the Fed continues to maintain a moderately restrictive policy — keeping rates higher than normal to suppress inflation while still trying to avoid damaging employment.

Employment: The Real Wild Card

Employment is where things get interesting. In his post-meeting remarks, Chair Jerome Powell surprised many by suggesting that job growth may be overstated by roughly 60,000 jobs per month. If true, this implies the U.S. may actually be losing about 20,000 jobs per month.

If employment begins to deteriorate more meaningfully, the Fed may be forced to cut rates more aggressively to stabilize the labor market.However, the Fed places greater weight on jobless claims data than headline job creation numbers.Why?

• Jobless claims reflect whether companies are actively struggling and laying off workers
• Claims have remained remarkably consistent over the past year
• This stability suggests businesses, overall, are not yet under significant distress

In contrast, job creation numbers are influenced by population growth and immigration — factors that don’t always reflect true corporate health.

The Bar for Future Rate Cuts Is Higher

The key takeaway from this meeting:
It will now take more severe employment weakness for the Fed to cut rates again.
Specifically:

• Jobless claims would need to rise sharply
• Economic stress would need to become more visible

Market expectations reflect this shift. According to CME Group data:

• The next meaningful probability of a Fed rate cut doesn’t appear until June 17, 2026
• That meeting currently carries an 80.4% probability of a cut

Notably, this meeting would also coincide with the arrival of a new Fed Chair, appointed by President Trump. The expectation is that the next chair may adopt a more aggressive tone toward rate reductions — though they still hold only one vote out of twelve.

Jeff’s Mortgage Rate Outlook for 2026

If I were placing a bet:

• Mortgage rates likely start 2026 steady, holding within a narrow band
• Expect a range of roughly 6.125%–6.375%

As we move into spring:

• The influence of the new Fed Chair becomes clearer
• Employment data may continue to soften
• We could see the 6% level tested, though not necessarily sustained

Mortgage Spreads: A Quiet Opportunity

Another factor that could help rates dip below 6% is narrowing mortgage spreads.

• The 10-year Treasury has hovered around 4.17%
• Mortgage rates have averaged around 6.30%
• That’s a spread of ~2.13%, which is above historical norms

In more typical markets, spreads fall closer to 1.5%–2.0% (per Fannie Mae). As investors gain confidence that rates have stabilized and aren’t poised for rapid declines, they may accept lower margins, which would translate into lower mortgage rates — even without major Fed action.

Market Volatility & the AI Factor

We should also expect occasional market swings tied to investor sentiment around Artificial Intelligence.

Periods of uncertainty or pullbacks in AI-driven equities often push capital into safer assets like mortgage-backed securities, which can temporarily push rates lower.

These moments may create short-term refinance opportunities worth watching closely.

Should Buyers Wait for Rates?

For buyers hoping for dramatic rate drops before entering the market:

• Waiting may continue well into 2026
• Rates are unlikely to fall sharply enough to shift buyer psychology

This environment supports a healthier, more balanced market, driven by buyers who genuinely want or need to move — not speculation.

Overall, I’m optimistic about the year ahead for:

• Homebuyers
• Strategic refinancers
• Anyone willing to plan rather than time the market

Rate Alerts Now Available

Our Rate Alert system is live. You choose your target rate, and when it hits, we’ll connect to decide whether it’s the right time to act. If you’d like to be included, just let me know.

Connect with Jeff

If you’d like to talk through your specific scenario or plan ahead, Jeff would be happy to help.
Schedule here: https://www.calendly.com/jeff-bochsler

Inspiration

“You can give without loving, but you can never love without giving.”
— Victor Hugo