By Katie Butler | February 11, 2026
If you’ve been waiting on the sidelines hoping for lower mortgage interest rates before buying or selling a home in Sacramento, you’re not alone. It’s the number one question I hear from clients right now: “Should I wait for rates to come down?”
Between this morning’s jobs report, the Federal Reserve’s recent decision to hold rates steady, and a potential shake-up in Fed leadership this spring, there’s a lot to unpack. Here’s what it all means for Sacramento real estate — and for your next move.
The Latest: Jobs Are Growing, But the Fed Isn’t Budging (Yet)
The National Association of Realtors’ chief economist Lawrence Yun released his instant reaction to today’s January jobs report, and the picture is mixed. The economy added 130,000 net new jobs in January, pushing total employment to an all-time high of 158.6 million workers — and that’s even after accounting for 312,000 federal government positions eliminated over the past year through DOGE.
So why does this matter for mortgage rates? Because the Federal Reserve watches jobs data closely when deciding whether to cut interest rates. Yun noted that while job growth is “respectable,” it’s been slower than you’d expect during a typical economic expansion. That kind of cooling should give the Fed reason to cut rates — but persistent inflation is holding them back.
At their January 28 meeting, the Fed voted to keep the federal funds rate at 3.5%–3.75%, pausing after three consecutive quarter-point cuts in late 2025. Fed Chair Jerome Powell described the economy as expanding at a “solid pace” but acknowledged that inflation “remains somewhat elevated.”
So When Could Interest Rates Actually Come Down?
Here’s where it gets interesting. Markets are currently pricing in roughly two interest rates drops in 2026, with the first likely coming no earlier than June. Several factors are in play:
A new Fed Chair is coming. Jerome Powell’s term expires in May, and President Trump has nominated Kevin Warsh to replace him. Warsh was historically a hawk (preferring higher rates), but recent signals suggest he may take a more dovish approach — which could mean more willingness to cut. His confirmation process and early leadership will be closely watched.
Inflation needs to cooperate. The Fed’s 2% inflation target remains elusive, with core inflation sitting around 2.7%. Until that number moves convincingly lower, the Fed will remain cautious. Tariff-related price pressures add another layer of uncertainty.
The labor market is the wildcard. Today’s jobs report is a perfect example. Yun pointed out that construction jobs are at a record high — great news for our market — but warned that if the southern border remains effectively closed and fewer workers enter the trades, we could see labor shortages that delay home construction and push costs higher.
What Does This Mean for Mortgage Interest Rates?
Here’s the key thing Sacramento buyers and sellers need to understand: mortgage rates don’t move in lockstep with the Fed’s rate cuts. Mortgage interest rates are more closely tied to the 10-year Treasury yield and broader investor sentiment about the economy.
The current consensus from major forecasters paints a picture of gradual improvement:
- Bankrate expects the 30-year fixed rate to hover around 6% through most of 2026, potentially dipping below that mark later in the year.
- Realtor.com and Redfin both project rates averaging around 6.3% in 2026, down from 6.6% in 2025.
- Morgan Stanley offers the most optimistic outlook, projecting rates could drop to 5.50%–5.75% by mid-year if Treasury yields decline as expected — though they caution rates could tick back up in the second half.
- Fannie Mae forecasts rates ending 2026 near 5.9%–6.0%.
The bottom line? Rates are likely to drift lower, but don’t expect a dramatic plunge. We’re not going back to 3% anytime soon — those were tied to extraordinary pandemic-era conditions.
What This Means for Sacramento Real Estate
For our local market, here’s how I see these dynamics playing out:
For buyers: Even a modest drop from today’s rates (currently around 6.1%) to the mid-to-high 5% range could meaningfully improve your monthly payment. On a $550,000 Sacramento home, the difference between a 6.2% and 5.75% rate saves you roughly $155 per month. And here’s the thing — you can always refinance later if rates drop further. You can’t go back and buy a home at today’s prices once more buyers flood in.
For sellers: The lock-in effect that’s kept so many Sacramento homeowners glued to their 3% mortgages is starting to loosen. As rates tick down, expect more inventory to come on the market — which means listing sooner, while competition is still relatively low, could work in your favor.
For the market overall: Lawrence Yun’s observation about construction jobs is particularly relevant here. Sacramento has benefited from strong new-home construction, but if labor shortages materialize in the trades, it could constrain our housing supply and keep prices firm even as rates improve.
Your Questions, Answered
Q: Should I wait to buy until rates drop more? The old adage holds true, if you qualify with today’s rates: marry the house, date the rate. If you find the right home in the right Sacramento neighborhood at a price that works for your budget, it often makes sense to move forward. Rates may come down — but so might your options, as more buyers enter the market. And refinancing is always on the table.
Q: Will home prices drop if rates go down? Probably not. Lower rates tend to bring more buyers into the market, which supports or even increases prices. Most forecasters expect Sacramento home prices to rise modestly — in the 2%–4% range — through 2026.
Q: Is a recession coming that could tank rates? While some economists see elevated risks, the consensus view is that the economy continues to grow. A severe recession would likely push rates much lower, but it would also bring job losses and tighter lending standards. In other words, be careful what you wish for.
Q: What about adjustable-rate mortgages (ARMs)? In a declining-rate environment, ARMs can offer attractive initial rates. But if you’re planning to stay in your home long-term, a fixed-rate mortgage gives you certainty. This is a conversation worth having with your lender based on your specific timeline and goals.
The Bottom Line for Interest Rates
The trajectory for interest rates in 2026 is cautiously encouraging. We’re likely to see modest improvement — especially in the second half of the year as a new Fed chair settles in and inflation (hopefully) continues to cool. But waiting for the “perfect” rate can mean missing the right home or facing stiffer competition.
If you’re thinking about buying or selling in Sacramento — whether it’s in Pocket Greenhaven, Land Park, South Land Park, Curtis Park, East Sacramento, West Sacramento or anywhere in between — I’d love to help you think through your options based on where the market is today and where it’s heading.
Have questions about how current rates affect your specific situation? Contact me for a no-pressure conversation about your next move.
Sources:
https://www.nar.realtor/blogs/economists-outlook/instant-reaction-jobs-february-11-2026
Katie Butler is a top 2% Sacramento real estate agent with over 12 years of experience, specializing in the Pocket-Greenhaven, Land Park, South Land Park Curtis Park, East Sacramento and West Sacramento neighborhoods. She leads Katie Butler Real Estate with Better Homes and Gardens Real Estate.