What a Kentucky Primary Just Told Us About Your Next Mortgage Rate

Updated May 2026

Mortgage rates in North County San Diego are near 6.4 percent as of May 2026, driven by 18-year-high Treasury yields, hot inflation tied to the war with Iran, and a bond market repricing federal fiscal risk. A drop to 4 percent now looks unlikely. The 5.5 to 6.5 percent range is the realistic base case for the next two to three years.

One of the more revealing housing market stories of the week did not come from a housing report. It came from a congressional primary in Kentucky’s 4th district. To understand where your next mortgage rate is heading, it is worth looking at that race alongside what has been happening in the Treasury market.

Ray Stendall, the broker behind Stendall Realty Group with eXp Realty, has tracked North County San Diego luxury and coastal pricing through every rate cycle for more than 20 years, with specific focus on Carlsbad, Encinitas, Del Mar, Solana Beach, and Rancho Santa Fe. His read on the current market, based on Treasury yield data, FOMC vote divisions, and federal fiscal signals, is that the widespread assumption rates will fall meaningfully now requires real recalibration.

How a Kentucky Primary Result Shows Up in Your Mortgage Quote

A congressional primary shifted mortgage rate expectations because it removed one of the few legislators publicly opposing federal deficit growth, reinforcing the bond market story driving long-term rates higher. Here is the chain that connects the two.

On Tuesday, May 19, Republican Representative Thomas Massie lost his primary to Trump-backed challenger Ed Gallrein, a former Navy SEAL, by roughly nine points in Kentucky’s 4th Congressional District. The contest drew more than $32 million in spending per Al Jazeera and Associated Press reporting, making it the most expensive House primary in American history. Massie had served since 2012 and was known for one thing more than any other. He was one of the most visible fiscal hawks in Congress. He wore a homemade debt-clock lapel pin, voted against the major spending bills of the past two administrations, and made deficit restraint his defining issue. He is now gone.

That is a political story. Here is why it is also a housing story.

What the Bond Market Already Saw This Week

Mortgage rates rose this week because bond investors demanded higher yields on long-term Treasuries, not because the Federal Reserve raised rates. The April CPI surprise, the active war with Iran driving oil prices, and a string of fiscal signals all hit at once.

The April Consumer Price Index, released May 12 by the Bureau of Labor Statistics, came in at 3.8 percent year-over-year. That is the highest reading since May 2023, confirmed by both BLS data and CNBC reporting. The Producer Price Index posted a 1.4 percent monthly gain in April, the largest monthly advance since March 2022. By Tuesday, the 30-year Treasury yield was trading near 5.2 percent, an 18-year high last seen in July 2007 per CNBC and CNN Business. The 10-year Treasury hit 4.687 percent at one point, the highest level since January 2025. Mortgage rates drifted from 6.36 percent on the Freddie Mac Primary Mortgage Market Survey to roughly 6.6 percent on daily lender quotes per Mortgage News Daily. None of that movement came from Federal Reserve action.

Massie’s defeat did not cause those yields to rise. The inflation data, the war with Iran pushing gasoline above $4 per gallon, and bond market repricing did most of that work. But the primary result arrived at exactly the wrong moment for bond investors who were already repricing fiscal risk. The bond market has one running concern. Federal debt approaching $39 trillion, large deficits, and a Congress with very little political appetite for spending restraint. When one of the few legislators publicly opposing deficit expansion gets defeated in the most expensive House primary in history, it reinforces a story bond holders were already telling themselves. Fiscal discipline has almost no political momentum.

That matters because Treasury yields, and by extension your mortgage rate, are set by people who lend the United States money for decades at a time. When those lenders raise their expected term premium, the extra yield they require to take on long-term risk, mortgage rates follow. The Federal Reserve sets the overnight policy rate. The bond market sets the long end. Your 30-year mortgage tracks the long end. This is the same dynamic that drives 30-year jumbo loan pricing in coastal North County, where most luxury financing tracks even longer-duration Treasury moves.

Why the New Fed Chair Cannot Easily Cut Rates

New Fed Chair Kevin Warsh wants to lower interest rates, but a divided committee and a bond market repricing for higher long-term yields will limit how much short-term Fed action can move your mortgage rate.

Warsh was confirmed as Federal Reserve Chair on May 13, 2026 by a narrow 54-45 Senate vote, with only Pennsylvania Democrat John Fetterman crossing party lines. The vote reflects the political tension around the Fed. Warsh replaces Jerome Powell, who has chosen to remain on the Board of Governors for a period of time to be determined, which is itself unusual. Per CNBC, the last time a Fed chair returned to the board was nearly 80 years ago. Warsh has stated publicly that he sees room to lower interest rates. He has also stated he made no rate-cut promises to the President.

He inherits a Federal Open Market Committee that produced its most divided vote since October 1992 at its April 29 meeting, with four dissenters. Three of them, regional presidents Beth Hammack of Cleveland, Neel Kashkari of Minneapolis, and Lorie Logan of Dallas, argued the committee was being too dovish, not too hawkish. The fourth, Governor Stephen Miran, wanted a cut.

So we now have a new Fed Chair widely understood to favor lower rates, leading a committee that is openly skeptical of cutting them, while futures markets have sharply repriced away from cuts and toward the possibility of hikes. CME FedWatch data this week shows roughly a 51 percent probability of a rate increase by December 2026, per CNBC reporting. As recently as April, those odds were close to zero.

What Henry Paulson’s “Break the Glass” Warning Actually Means

Former Treasury Secretary Henry Paulson, who managed the 2008 financial response, told Bloomberg in April that the United States needs an “emergency break-the-glass plan” ready in case demand for U.S. Treasuries collapses. The warning is not a prediction. It is a signal of how seriously professional bond investors view the fiscal risk.

The interview aired April 16 on Bloomberg Television’s Wall Street Week with David Westin. Paulson called the potential fallout “vicious,” noting the timing is impossible to predict but the country needs a plan ready before the wall is hit. Paulson is not a partisan figure. He served under President Bush, has worked across administrations, and rarely raises public alarms about the financial system. When he uses language like “vicious” to describe the bond market risk, professional investors listen.

What This Means for the Housing Market

Mortgage rates over the next two to three years are likely to settle in the 5.5 to 6.5 percent range, not the 4 to 5 percent range many North County buyers have been waiting for. A drop to 5 percent is possible. A meaningful drop to 4 percent has narrowed considerably as a probability.

The widespread assumption among real estate professionals for the past two years has been that rates will eventually come down meaningfully once the Federal Reserve begins its next easing cycle. That assumption may be too optimistic. It rested on the idea that Fed rate cuts would translate cleanly into lower long-term yields and therefore lower mortgage rates, the way they generally have for the past forty years.

The events of the past two weeks suggest that translation may be impaired. If the Fed cuts and bond holders simultaneously demand higher long-term compensation for fiscal risk, the long end of the curve can rise while the short end falls. Mortgage rates would settle higher than the historical relationship implies. Ray Stendall’s base case reflects exactly this dynamic.

One thing working in the other direction is worth knowing about. The Trump administration has been explicit about its housing policy. At a January 29 Cabinet meeting, the President stated directly that he wants to keep home prices up, not down. The administration has directed Fannie Mae and Freddie Mac to purchase $200 billion in mortgage-backed securities, a move intended to narrow mortgage spreads and reduce consumer rates. For buyers using conforming loans in Carlsbad or Encinitas, this is the policy lever most likely to keep your rate from spiking further. This is a direct counter-force to the bond market repricing described above. It may not fully offset the term premium expansion, but it does meaningfully cushion the impact on mortgage borrowers. If you own a home, this is a policy aligned with protecting your equity. If you are trying to buy one, it likely means rates settle at workable levels rather than spiking.

What This Means for Coastal North County San Diego

Coastal North County San Diego markets including Carlsbad, Encinitas, Del Mar, Solana Beach, and Rancho Santa Fe have stayed competitive through the current rate cycle because cash buyers and equity-rich buyers continue to transact. Inland and commuter belt markets face more pressure.

The premium coastal zip codes including 92008, 92009, and 92011 in Carlsbad, 92024 in Encinitas, 92014 in Del Mar, 92075 in Solana Beach, and 92067 and 92091 in Rancho Santa Fe have always been less rate-sensitive than the inland and commuter areas. La Costa, Aviara, Olde Carlsbad, Olivenhain, Leucadia, Cardiff, Del Mar Heights, the Covenant in Rancho Santa Fe, and Fairbanks Ranch see a larger share of demand from equity-funded and cash buyers who are not waiting on a Fed decision to move. We continue to see coastal listings draw multiple-offer activity through this rate environment, while the Battleground areas one tier inland see slower price action than they would in a falling-rate environment. The commuter belt areas furthest from the coast remain under the most pressure from a combination of fuel costs, insurance availability, and elevated rates.

Should You Wait for Lower Mortgage Rates Before Buying?

Waiting for mortgage rates to fall before buying in North County San Diego now carries real opportunity cost. Decisions that work at 6 percent are decisions you can make today. Decisions that only work at 4 percent may need to wait longer than expected.

If you have been waiting for rates to fall, this is the moment to honestly reassess what you are waiting for. The bond market is telling us something coherent, and former Treasury Secretaries are echoing it. The political infrastructure is signaling that fiscal restraint is not on the immediate horizon. The Federal Reserve has a new chair who wants to cut but cannot do so without a fight. Inflation is running at 3.8 percent and rising, not 2 percent and falling.

This is not a prediction of crisis. It is a recalibration of expectations.

These are not catastrophic conditions. They reward homeowners who already own, they reward cash and equity-rich buyers, and they create real cost for people who keep waiting for a rate environment that may not arrive on the timeline they have been promised.

Frequently Asked Questions: Mortgage Rates in North County San Diego

Will mortgage rates drop to 4 percent in 2026?

A drop to 4 percent looks less likely than it did six months ago. The combination of sticky inflation, rising Treasury yields, the Iran war pushing oil prices, and limited political appetite for fiscal restraint has pushed back the timeline. Ray Stendall’s base case is that 30-year mortgage rates settle in the 5.5 to 6.5 percent range over the next two to three years, with a drop to 5 percent still possible but a meaningful drop to 4 percent now a low-probability scenario.

Why are mortgage rates rising if the Fed wants to cut?

Mortgage rates track long-term Treasury yields, not the Fed’s overnight policy rate. Bond investors set those long-term yields based on expectations for inflation, federal debt, and fiscal risk. Right now those investors are demanding more compensation for long-term lending, which pushes mortgage rates up even as the Fed signals cuts.

Should I buy a home in Carlsbad or Encinitas right now?

For the premium coastal markets in North County San Diego, the answer depends less on the next quarter’s Fed decision and more on whether the purchase makes sense at current rates. Stendall Realty Group works with clients across Carlsbad zip codes 92008, 92009, and 92011, Encinitas 92024, Del Mar 92014, Solana Beach 92075, and Rancho Santa Fe 92067 and 92091. The data shows these coastal zip codes have stayed competitive through this entire rate cycle because cash buyers and equity-rich buyers keep transacting.

Is it worth waiting another year to buy in San Diego?

Waiting only pays off if rates fall meaningfully and prices stay flat. The Trump administration’s stated housing policy is to support prices, not let them slide. If rates settle around 6 percent and prices hold or appreciate, the cost of waiting can exceed the savings on the eventual rate. Ray Stendall typically runs a side-by-side cost analysis for clients sitting in this exact decision.

What is Henry Paulson’s “break the glass” plan about?

Former Treasury Secretary Henry Paulson, who managed the 2008 financial response, used the phrase in an April 16 Bloomberg interview to describe the need for a contingency plan if demand for U.S. Treasuries collapses. He did not predict a collapse. He said one is now plausible enough that the country should prepare. For homeowners and buyers, this is the kind of language professional bond investors take seriously, and it shows up in higher term premiums and elevated mortgage rates.

Does the new Fed Chair Kevin Warsh change my mortgage timeline?

Kevin Warsh has stated he wants to cut rates, but he inherits a divided committee and a bond market repricing for higher long-term yields. Even if Warsh delivers cuts on the short end, the long end may not follow. Your mortgage rate tracks the long end. So a new Fed Chair does not automatically mean lower mortgage rates.

Talk Through Your Specific Situation

If you would like to talk through what this means for your specific property, neighborhood, or situation, Ray Stendall is always available to walk through it. The macro picture is one thing. Your specific decision in your specific zip code is another. That conversation is the one worth having.

Coverage extends across Carlsbad, Encinitas, Del Mar, Solana Beach, Rancho Santa Fe, Poway, Carmel Valley, and the rest of North County San Diego. Call or text 858-877-0484, or visit stendallrealtygroup.com. Ray Stendall | Stendall Realty Group | eXp Realty | DRE #02038682.