Suppose you've been following the news this fall or scrolling through your social media feeds. In that case, you've probably seen headlines about Federal Reserve rate decisions, inflation concerns, and predictions about where mortgage rates are headed. For most people, discussing the Fed and its rate decisions seems abstract and disconnected from their daily lives. But you're thinking about buying or selling a home here in Rock County. In that case, these Federal Reserve decisions have very real and immediate impacts on your options, your budget, and your strategy.
As real estate professionals who have lived and worked here for years, helping families navigate everything from the historic neighborhoods downtown to the newer developments on the west side, from Milton to the town of Harmony, we know and understand how confusing and frustrating it can be to try to time the market or figure out what economic news means for your personal situation. This is the reason we wanted to write about this today. We aim to break down what's actually happening with the Federal Reserve, how it affects mortgage rates, and, most importantly, what it all means for the Rock County real estate market right now.
Have you ever wondered what the Federal Reserve does? Let's get you started with a foundational understanding so you can make better decisions, so let's keep it simple and begin with "Zuelke Fed 101 basics". The Federal Reserve, also known as the "Fed," is widely considered the central bank of the United States. One of its primary responsibilities is managing inflation and promoting economic stability. The federal funds rate is the primary tool the Fed uses to accomplish this. The federal funds rate is the interest rate that banks charge each other for overnight loans.
Okay, so what does lending money to each other by banks have to do with my mortgage? The connection is more direct than you might expect. Whenever the Fed increases or decreases this benchmark rate, a ripple effect is transmitted throughout our entire economy. Banks immediately adjust their prime lending rates based on the new federal funds rate, which in turn affects everything from credit card interest rates to auto loans, and, yes, mortgage rates.
Additionally, the Fed's overall monetary policy and its decisions regarding interest rates significantly influence investor behavior in the bond market, which in turn impacts mortgage rates. It's important to understand that the Fed doesn't directly set mortgage rates. Mortgage rates are primarily influenced by the bond market, particularly the yield on ten-year Treasury bonds. It's an indirect relationship, but a powerful one.
For context, let's discuss where we've been, the recent rate environment, and what has changed. During the COVID-19 pandemic, the Federal Reserve dropped interest rates to near zero in an effort to support the economy. This created a remarkable period for mortgage rates. In late 2020 and into 2021, thirty-year fixed mortgage rates dipped below 3 percent, with some rates even falling below 2.5 percent for well-qualified borrowers. It was an unprecedented opportunity, and many Rock County homeowners refinanced their mortgages. At the same time, countless buyers entered the market to take advantage of these historically low rates.
Then, supply chain disruptions, increased consumer demand, government stimulus, and various other economic factors contributed to a dramatic rise in inflation throughout 2021 and 2022. The Fed responded by implementing one of the most aggressive rate-hiking campaigns in modern history. Starting in March 2022, they began raising the federal funds rate repeatedly, eventually bringing it from near zero to over five percent.
This dramatic shift had an equally dramatic effect on mortgage rates. In the fall of 2023, thirty-year fixed mortgage rates surpassed 7.5 percent, more than tripling from their pandemic lows. For buyers, this meant significantly reduced purchasing power. A buyer who could afford a $350,000 home at 3 percent interest suddenly found they could only afford a home around $260,000 at 7 percent, assuming the same monthly payment budget.
Here in Rock County, we felt these changes acutely. Our market, which had been red-hot in 2020 and 2021 with bidding wars and homes selling within days of listing, began to cool considerably. Buyers became more cautious and selective. Sellers had to adjust their expectations about how quickly homes would sell and at what price.
Where are we this October? Now, in the fall of 2025, we see a more nuanced picture — and, frankly, a more interesting one. The Federal Reserve has signaled that its aggressive rate-hiking campaign is over. Inflation has cooled considerably from its peak, though it remains above the Fed's two percent target. Economic growth has been more resilient than many economists predicted, and the job market, including here in Rock County, remains relatively strong.
The Fed has begun lowering rates from their peak levels. However, it is being cautious about the pace and extent of the cuts, as it attempts to strike a balance between supporting economic growth and ensuring that inflation doesn't resurge. Every Fed meeting this fall has been closely watched by economists, investors, and real estate professionals alike as we try to gauge where rates are headed in the coming months.
As of September 30, 2025, we observe thirty-year fixed mortgage rates hovering in the low to mid-six percent range for well-qualified borrowers. However, individual rates vary based on multiple factors, including credit scores, down payments, and other considerations. This represents a notable decrease from the peaks we saw in 2023. However, it's still roughly double the ultra-low rates of the pandemic era.
The question everyone is asking is where rates go from here. Will they continue declining toward five percent or even lower? Will they stabilize around current levels? Could they rise again if inflation proves stubborn? The honest answer is that nobody knows for sure, not even the Fed itself, because so much depends on economic data that has not yet occurred. However, we can examine the factors that will influence their decisions and make informed assessments about likely scenarios.
Have you ever wondered how the Fed makes its decisions and what influences it? The Federal Reserve makes decisions based primarily on two mandates: maintaining price stability, which means keeping inflation in check, and promoting maximum employment. They analyze mountains of economic data, including inflation rates, employment numbers, GDP growth, consumer spending, manufacturing data, and global economic conditions.
Examining the current data, inflation has decreased significantly from its peak of over 9% in the summer of 2022. Currently, inflation is running around 3 to 3.5 percent, depending on the measure used, which is much better but still above the Fed's 2 percent target. The job market remains strong, characterized by low unemployment rates and increasing wages. However, there are signs of softening in specific sectors. Economic growth has been positive but moderating from the strong growth seen earlier in the recovery.
This set up a tricky high-wire balancing act for the Fed. Suppose they cut rates too quickly or by too large an amount. In that case, they risk reigniting inflation, which would force them to raise rates again and potentially trigger a recession. Our concern is that if the Fed keeps rates too high for too long, it risks unnecessarily slowing economic growth and increasing unemployment. They're trying to engineer what economists call a soft landing, where inflation decreases without triggering a recession.
For the remainder of 2025 and into 2026, most economists expect the Fed to continue gradually lowering rates, assuming inflation continues to moderate, and the economy doesn't show signs of overheating. We expect them to move slowly and cautiously, making minor rate cuts and pausing to assess the impact before making additional cuts.
Earlier in the article, we said the Fed doesn't directly set mortgage rates. However, its policy direction has a significant influence on them. When the Fed signals that it'll cut rates, bond yields typically decline in anticipation, which puts downward pressure on mortgage rates. We saw this dynamic play out in late 2024 and early 2025 when mortgage rates began declining before the Fed started cutting rates, simply because the market anticipated the cuts were coming.
However, it's not a direct, straight-line relationship. We've seen periods where the Fed cut rates, but mortgage rates didn't decline as much as expected because investors were concerned about future inflation or economic instability.
Federal Reserve policy isn't the only factor that influences mortgage rates. In fact, you need to be aware of several factors that contribute in their own way, including the overall economic outlook, geopolitical events, the supply and demand for mortgage-backed securities, and investor expectations regarding future inflation.
We're monitoring the situation closely to see if the Fed continues down the moderate path of gradual rate cuts and inflation. Because if they do, then mortgage rates could drift downward toward the five to six percent range. This would represent a significant improvement from recent peaks. However, it would still be well above the exceptional rates we enjoyed during the pandemic era. However, if economic data surprises to the upside with stronger growth and more persistent inflation, rates could stay higher for longer or even increase again.
The key insight for Rock County buyers and sellers is that mortgage rates are likely to remain in a range that's higher than what many people have become accustomed to over the past decade, but lower than the painful peaks of 2023. This creates a specific set of opportunities and challenges for our local market.
What does this mean to home buyers? Suppose you're considering buying a home in Janesville. In that case, you may be wondering whether to proceed now or wait to see if rates decline further. It's a question we hear frequently, and while every situation is unique, several key factors should be taken into consideration.
First, let's talk about math. A one percent change in mortgage rates can significantly impact your monthly payment and purchasing power. On a $275,000 home, which is close to Janesville's median home price, the difference between a 6% rate and a 7% rate is about $173 per month, or over $2,000 per year. Over the life of a thirty-year loan, that's over $60,000 in additional interest.
Yes, rates do matter, and waiting for better rates can save you a significant amount of money. However, and this is crucial, you can't look at interest rates in isolation. You also need to consider that home prices today have increased substantially. If rates drop significantly, more buyers will enter the market because homes become more affordable. Increased buyer demand typically pushes home prices higher. We saw this dynamic clearly during the pandemic when rock-bottom rates fueled intense competition and rapid price appreciation.
Here in Janesville, home prices have shown steady appreciation, with the market remaining very competitive according to recent data. Our market has been experiencing increased activity, with reasonable buyer demand and prices that have maintained their value, showing year-over-year increases of around 5 to 6 percent. If and when mortgage rates drop meaningfully, say into the five percent range or below, we expect to see increased buyer activity and upward pressure on prices.
The question then becomes: is it better to buy now at current prices with current rates, or wait for potentially lower rates but likely higher prices? The math often works out to be similar. Suppose you wait six months and rates drop half a percent, but prices increase five percent. In that case, you might end up with a similar monthly payment or even a higher one, and you've lost six months of building equity and enjoying your own home- or for that matter- getting the home you really wanted!
There's also the opportunity cost of waiting. Rent in Janesville & much of Rock County has been climbing steadily, and every month you rent is a month you're paying someone else's mortgage instead of building your own equity. If you wait a year hoping for better rates, that's a year of rent payments that don't make any wealth for you.
Another factor to consider is that you can always refinance if rates drop significantly in the future. If you buy now at 6.25 percent and rates drop to 5 percent in eighteen months, you can refinance and capture that lower rate. Yes, refinancing has costs, but it gives you flexibility. You can't, however, go back and buy the same house at today's price if prices increase while you're waiting for better rates.
The current rate environment offers some advantages for buyers. Competition is moderate rather than intense, which means you have time to find the right home without feeling pressured to make snap decisions or waive contingencies. Sellers are more negotiable than they were during the frenzy of 2021, and you can negotiate seller concessions for closing costs or repairs that were unthinkable a few years ago. Inspections are back to being standard rather than waived, which protects you as a buyer.
For Rock County first-time buyers, there are helpful programs worth exploring, including the Wisconsin Housing and Economic Development Authority, which offers competitive interest rates and down payment assistance to qualified buyers. These programs can make homeownership more accessible even in a higher-rate environment.
The bottom line for buyers is that if you're financially ready, have stable employment, plan to stay in your home for at least five years, and have found a property that meets your needs at a price that fits your budget, the current market conditions are pretty reasonable for purchasing. Trying to perfectly time the market by waiting for the absolute lowest rates often backfires because other factors change while you're waiting.
If you're considering selling your Rock County home, the current rate environment presents its own set of considerations. Many potential sellers are experiencing what the industry refers to as the "golden handcuffs" or "lock-in" effect. Suppose you refinanced your mortgage in 2020 or 2021 at three percent or less. In that case, the thought of selling and buying another home at today's six percent rates can be psychologically challenging, even if the new home is bigger, better located, or otherwise more suitable for your current needs.
This lock-in effect has constrained inventory nationwide, including here in Rock County. Many people who usually move for various life reasons are choosing to stay put, renovate, or make do with their current homes rather than give up their low mortgage rates. This reduced inventory has helped support home prices even as buyer demand has moderated.
However, there are several reasons why selling now might make sense despite the rate environment. Life events don't wait for perfect market conditions. If you've had a job change, your family has grown or shrunk, you need to relocate to care for aging parents, or your current home no longer meets your needs, the cost of staying in an unsuitable home can outweigh the benefits of keeping a low-interest rate.
Additionally, for sellers who own their homes outright or have very low remaining balances, the rate environment is less relevant to their personal situation. If you're downsizing and planning to buy a less expensive home, or if you're relocating to a rental or moving in with family, then your low mortgage rate isn't a reason to stay put.
The current market also offers advantages for sellers. While we're not seeing the multiple offers and over-asking prices that were common in 2021, well-priced homes in good condition in desirable neighborhoods are still selling at great prices within a reasonable timeframe. You have enough buyer activity to feel confident you'll sell, but not so much frenzy that buyers are making reckless offers they might back out of later.
Numbers don't lie, so choose a professional who can help you focus on current market conditions and recent comparable sales data. Price your home correctly based on the data, stage it effectively, and market it well in both traditional and digital media. You should be able to sell it successfully. The key is working with experienced real estate professionals who understand current market dynamics and can position your home competitively.
For sellers who are also buyers, meaning you're selling your current home and buying another in Rock County, the rate environment affects both sides of your transaction. Yes, you'll likely be getting a higher mortgage rate on your new purchase than what you currently have. But you're also selling into a market where your home's value has appreciated significantly since you bought it, assuming you purchased before the recent rapid price growth. Many homeowners have substantial equity that can be leveraged into a larger down payment on their next home, which can help offset the impact of higher interest rates.
There's also a strategy for financing your next home. Some buyers are choosing to make larger down payments to reduce their loan amount and monthly payment. Others are considering adjustable-rate mortgages, which currently offer rates about half a percent to a full percent lower than those of fixed-rate mortgages. If you're confident that you'll refinance when rates drop or you don't plan to keep the home long-term, an ARM might be a good option. Some buyers are even purchasing with cash if they have the means, then refinancing once rates are more favorable to pull some money back out for other investments.
The key point is that there are strategies to navigate the current rate environment, whether you are a seller or a buyer. They're worth exploring with a qualified real estate professional and mortgage advisor who can help you model different scenarios based on your situation.
Let's zoom in on what we're seeing right here in Rock County because while national trends matter, real estate is ultimately local. Our market has some unique characteristics that influence how the Fed's rate decisions get implemented locally.
Historically, Janesville's economy has been diverse, due to our strong manufacturing base; however, the community has successfully diversified beyond its automotive heritage. The presence of major employers, including Mercy Health System, Rock County, the School District of Janesville, and various manufacturing and distribution companies, provides a stable foundation for our housing market. Our proximity to Madison and Milwaukee also provides employment opportunities for commuters while offering more affordable housing options than those in larger markets.
Our home prices are also quite affordable compared to much of the Midwest. While Janesville & Rock County has certainly seen appreciation in recent years, our median home price remains well below both the state and national medians. This relative affordability means that even with higher mortgage rates, homeownership remains within reach for many families here, unlike in markets such as Madison, the Milwaukee suburbs, or indeed the Chicago area, where prices have skyrocketed.
The mix of housing stock in Janesville is another factor. We have everything from historic homes in the Near East Side to mid-century ranches throughout the city, as well as newer construction in subdivisions on the west and south sides. Different segments of our market respond differently to rate changes. Higher-end properties are more sensitive to rate fluctuations because the absolute dollar impact of rate changes is larger on expensive homes. More affordable properties tend to be less sensitive because they're serving buyers who have fewer options and may be comparing homeownership costs to rising rents.
We also see interesting dynamics in different neighborhoods. Areas with excellent schools, such as those feeding into Craig High School and Parker High School, neighborhoods with easy access to major employers, and those offering desirable amenities, are holding their value exceptionally well. Some of the outlying rural areas and properties that need significant work are seeing softer demand and require more competitive pricing.
The rental market in Janesville has remained strong, with rising rents pushing more people to consider purchasing rather than continuing to rent. When we run the numbers for clients, the monthly cost of owning versus renting is often quite comparable or even favorable toward buying, even with today's rates, especially when you factor in the equity building and tax benefits of ownership.
Inventory levels in Janesville have been gradually increasing from the extremely tight levels of a couple of years ago. However, we're still below what would be considered a balanced market. This means sellers still have some leverage, though not the overwhelming advantage they had in 2021. For buyers, increased inventory means more choices and less pressure, which is healthy for making good decisions.
One trend we are closely watching is the impact of remote work policies on our market. Janesville has attracted migration from more expensive areas, particularly from Chicago and Milwaukee, as remote work has become more accepted. This shift has brought buyers with competitive budgets who appreciate the smaller-city lifestyle. This influx has supported various price points across our market. However, as some companies pull back on remote work flexibility, we're monitoring whether this trend continues or moderates.
The new construction market in Janesville has been interesting to watch.
As interest rates spiked, local builders slowed down. This resulted in a pullback in new housing starts. However, we're now seeing builders getting increasingly creative with programs that offer incentives, including rate buydowns, where they pay points to lower your mortgage rate, contributions toward closing costs, and upgrades included in the base price. These incentives can make new construction surprisingly competitive with existing homes, even though the base prices appear higher. Whether you're buying, selling, or both in the Janesville market, there are specific strategies worth considering given the current rate environment and economic outlook.
For buyers, getting pre-approved is more crucial than ever. With rates more volatile than they were in the past, knowing exactly what you qualify for and what your monthly payment will be gives you confidence to act when you find the right property. Shop around with multiple lenders because rates and terms can vary significantly. Ask about rate locks and how long they're suitable for. Consider whether paying points to buy down your rate makes sense for your situation, particularly if you plan to stay in the home long-term.
Be realistic about your budget and monthly payment comfort level. Don't assume rates will drop dramatically soon and stretch to buy a house that is more than you can afford now. On the other hand, don't wait indefinitely, hoping for perfect conditions. If you're financially ready and find a home you love at a price that works for your budget at current rates, that's a win.
For sellers, pricing is critical in this market. Hoping to catch a buyer who will overpay rarely works out, so setting an unjustified high price is not a winning strategy. Work with an experienced real estate professional who will collect the data and analyze recent comparable sales, understand the days-on-market trends in your neighborhood, and price competitively from the outset. Homes that sit on the market for too long tend to look stale and often sell for less than they would have if they'd been priced correctly initially.
How can minor improvements or impactful staging help your home present itself more favorably if you're trying to justify a higher initial price point? Sometimes, investing a few thousand dollars in painting, landscaping, or decluttering can return many multiples in increased sale price. Ensure your home is easy to show and accessible for appointments, as buyers now have more options and won't tolerate scheduling difficulties.
Be open to negotiating. Offering to contribute toward buyers' closing costs can be an effective way to help them overcome affordability challenges without reducing your sale price. Being flexible with closing dates can also make your property more attractive to buyers who need to coordinate the sale of their current home.
For those who are both buying and selling, timing becomes crucial. In some cases, selling first and renting temporarily while you search for your next home gives you the strongest negotiating position as a buyer. In other cases, buying first with a sale contingency or a bridge loan makes more sense. Every situation is different, and it's worth mapping out various scenarios with your real estate professional.
So, what does the future hold for mortgage rates and the Rock County real estate market in 2026 and beyond? While we can't predict with certainty, we can outline likely scenarios based on current economic trends and Fed guidance.
The most probable scenario is that the Fed continues to gradually lower rates through late 2025 and into 2026, provided inflation continues to moderate without signs of a recession. This would likely bring mortgage rates down into the mid-five percent range over the next six to twelve months. Such a decline would be meaningful and would likely bring more buyers into the market, supporting price appreciation in Janesville at a rate of low to mid-single digits annually, rather than the dramatic gains seen in 2020 and 2021.
A more optimistic scenario would be faster rate cuts if inflation drops more quickly than expected or if there are signs of economic weakness that concern the Fed. This could push mortgage rates down toward five percent or even below. However, this scenario raises concerns about economic growth and employment, so it's not necessarily all positive, even though the lower rates would be welcome.
A less favorable scenario would be if inflation proves stubborn or resurges, forcing the Fed to pause rate cuts or even raise rates again. This could keep mortgage rates elevated in the six to seven percent range for an extended period. Such an environment would likely result in continued moderate demand and relatively stable price appreciation in Janesville.
The reality is that some uncertainty is always present in real estate markets and that perfect clarity about future rates and prices is impossible. What we can say with confidence is that Janesville's fundamental strengths, including its stable economy, exceptional affordability, quality of life, strong schools, and welcoming community, make it a solid market for both buyers and sellers, regardless of rate fluctuations.
So why does professional guidance matter? The smoothest real estate transactions have always required expertise; however, in the current environment of economic uncertainty and changing rate dynamics, having experienced professionals on your side is more valuable than ever.
The Zuelke Real Estate Team has been helping Southcentral Wisconsin families buy and sell homes through multiple market cycles, varying interest rate environments, and diverse economic conditions. We stay on top of current mortgage rate trends, Federal Reserve decisions, and financial indicators so that we can provide you with informed guidance on timing and strategy.
We've also established relationships with reputable local lenders who offer competitive rates and innovative financing solutions. We know the Janesville market intimately, from the historic neighborhoods downtown to the newer subdivisions on the west side, from Milton to Beloit, and everywhere in between.
Successful real estate transaction fundamentals remain the same, regardless of whether interest rates are rising, falling, or holding steady. It's about finding the right property at the right price, negotiating effectively, and managing the transaction smoothly by making informed decisions based on accurate data, correct information, and sound strategy. That's what we do every day, and it's what we'd love to help you with.
If you've been sitting on the sidelines waiting for perfect conditions, or if you're unsure whether now is the right time to make a move, or if you have questions about current rates and their implications for your situation, we'd be happy to talk with you. There is no obligation and no pressure - just a conversation with experienced local professionals who can offer you honest advice tailored to your specific circumstances.
Real estate decisions are significant and deserve thoughtful consideration based on accurate information, rather than headlines and speculation. The interplay between Fed policy, mortgage rates, home prices, and market dynamics is complex, but it's not mysterious. With proper guidance, you can make confident decisions that serve your needs and goals.
The Rock County market right now offers genuine opportunities for both buyers and sellers. It's no longer the frenzied seller's market of a few years ago, nor is it the buyer's market of the housing crisis era. It's something in between that creates space for good deals and successful transactions without the stress of extreme market conditions.
Interest rates are just one piece of the puzzle. Specific properties you're considering, your life circumstances, your financial readiness, and your goals all matter at least as much as the current rate environment. Let's discuss your entire situation and determine the strategy that best suits you.
Whether you're a first-time buyer trying to get into homeownership, a growing family that needs more space, empty nesters ready to downsize, investors looking at Rock County’s market, or someone relocating to our welcoming community, don't let uncertainty or headlines keep you from exploring your options. The best time to start a conversation is always now, because information and understanding give you the power to make good decisions.
Contact The Zuelke Team today or visit our website to schedule a complimentary consultation. Your real estate goals deserve professional guidance from people who know Janesville inside and out, and we're here to provide exactly that.
The Zuelke Team - Your Rock County Real Estate Experts
Phone: (608) 295 - 9866
Website: https://jeffzuelke.com/
Let's talk about how current mortgage rates and market conditions affect your specific goals and what opportunities are available to you right now in Rock County.