Turns Out, Lower Rates aren’t Always the Answer

Over the last few years, every time there’s even a hint that mortgage rates might dip back into the 5% range, the real estate industry starts buzzing. You’ll hear talk or see social media posts about a buyer surge that’s just around the corner, ready to flood back into the market. And to be fair, the logic checks out. Home prices are high, and unless something significant causes them to drop, the more impactful lever on affordability is the interest rate.

Then in August, something happened. We didn’t quite hit the 5% range, but rates did drop by half a percent over just a few days, falling from the high 6s into the mid-6s. That quick drop sparked a noticeable jump in buyer activity, stronger than what we typically see in August.

So the industry was right? Well… maybe not entirely.

In October, rates fell even further. On average, they landed around 6.3%. But unlike August, buyer activity didn’t respond the same way. In Bend, activity was 17% below what we’d expect for the month. And in surrounding communities, buyer activity held flat from September to October. That kind of behavior usually reflects buyers either feeling priced out of Bend or wanting more value for their dollar.

So what gives?

In digging into this, I came across a psychological concept called hedonic adaptation. In simple terms, when something improves quickly, it feels exciting. That sudden change gives people a sense of hope or optimism, like we saw in August. But once the dust settles, even if things continue to improve, the novelty wears off. The improvement becomes the new baseline, and people stop reacting to it. That’s why October’s slower but steady rate improvement didn’t generate the same spark. The initial jolt in August wasn’t just about the rate level; it was about how quickly it changed.

So why does this matter?

If I’m selling a home, it’s a reminder that better rates don’t automatically mean a better market. That kind of thinking can set me up for disappointment. If I’m a buyer, and I can comfortably afford the monthly payment now, it’s still a smart time to act. Negotiation power is real right now, and there are ways to structure a deal that brings a 6% rate down into the 5s or even the 4s.