The 10-Year Treasury Is Above 5% Again: Why 2026 Is Not 2007

The 10-year U.S. Treasury yield has crossed 5%, reaching territory that immediately takes me back nearly 20 years.

I remember 2007.

I was 27 years old, living in a loft South of Market in San Francisco and originating mortgages. Britney Spears had shaved her head a few months earlier. Paris Hilton was dominating the news. The iPhone was brand new. It was a completely different world.

And the 10-year Treasury was above 5%.

I remember watching the bond market and thinking about what it meant for mortgage rates and housing. At the time, the housing market was already showing cracks. Then the headlines surrounding Countrywide and the broader subprime mortgage industry began getting progressively worse.

I remember thinking: This may be bigger than we realize.

It was.

But seeing the 10-year Treasury above 5% again in 2026 does not mean we're heading into another 2008.

The Housing Market Was Very Different in 2007

Before the Great Recession, lending standards and mortgage products were dramatically different.

Subprime lending was widespread. Pay-option adjustable-rate mortgages allowed borrowers to make payments that sometimes didn't even cover the interest due. Low- and no-down-payment financing was common, and many homeowners had very little equity.

When housing prices fell, some homeowners didn't have enough equity to sell their properties and pay off their mortgages.

That's when we began seeing foreclosures, bankruptcies and short sales on a massive scale.

By 2009 through roughly 2011, properties in some markets were selling at enormous discounts from their previous peaks.

I remember that market too.

I had become extremely fluent in conventional, FHA and VA financing, and those programs became incredibly important as traditional buyers returned to the market.

Mortgage lending was also very different operationally. This was before Dodd-Frank and today's disclosure timelines.

Our team's marketing back then was literally built around the "Five-Day Close."

If we couldn't close your purchase loan in five days, our promotion said we'd give you a plasma television.

Yes, a plasma television.

That sentence alone tells you how long ago 2007 was.

Then Something Else Happened: America Didn't Build Enough Housing

One of the biggest differences between today's housing market and the one entering the Great Recession is housing supply.

U.S. Census data on today's housing stock illustrates the change.

Approximately 20.1 million existing housing units were built during the 1970s. Roughly 18.5 million were built during the 1980s and 17.4 million during the 1990s. Nearly 20 million of today's units were built during the 2000s.

Then came the 2010s.

Only about 14.3 million units in today's housing stock were built during that entire decade.

Construction eventually recovered, but the post-financial-crisis building slowdown left the United States with a very different supply picture.

That matters enormously when trying to compare 2026 with 2007.

Could Home Prices Correct? Absolutely.

I believe we're already seeing a shift in housing.

Higher mortgage rates have hurt affordability. There are fewer buyers able or willing to purchase at certain price points. Inventory has increased in many markets. Sellers have more competition. Buyers can negotiate again.

That can put downward pressure on prices.

But a price correction isn't automatically a housing crisis.

Consider a homeowner who purchased for $800,000 years ago.

Maybe that home could have sold for $1.2 million at the market's peak. If conditions change and the owner eventually sells for $1.05 million, the headlines may call that a declining market.

But that homeowner still has substantial equity.

That is completely different from a homeowner owing $850,000 on a property worth $700,000 and having no ability to sell without negotiating a short sale with the lender.

That's an important distinction.

Buyers Are Starting to Notice

Despite the headlines and higher rates, buyers haven't disappeared.

In roughly the last two and a half weeks, our team has helped nine buyers get into escrow.

We've also received approximately 40 new buyer applications.

I'm hearing from people who spent months sitting on the sidelines and are now asking a different question.

Instead of simply asking, "When will rates come down?"

They're asking, "Is there an opportunity because everyone else is scared?"

That's a much more interesting question.

A buyer today may encounter fewer competing offers, longer listing times, price reductions, seller credits and sellers who are actually willing to negotiate.

That doesn't automatically make buying the right decision. The payment still needs to make sense. The buyer still needs reserves. The property still needs to fit the long-term plan.

But markets often look most uncomfortable precisely when negotiating opportunities begin appearing.

Why the Federal Reserve Matters This Week

The Federal Reserve's September meeting concludes today, and markets are anticipating another rate hike as policymakers confront inflation.

Interestingly, a Fed rate hike doesn't automatically mean mortgage rates move higher.

Mortgage rates are influenced heavily by the bond market, particularly expectations surrounding inflation and longer-term economic conditions.

If Fed Chair Kevin Warsh convinces markets that the Federal Reserve is serious about getting inflation under control, investors could become more comfortable owning longer-term Treasury securities.

That could potentially calm Treasury yields.

The opposite is also possible.

If markets believe the Fed isn't doing enough to contain inflation, investors may demand higher yields to compensate for inflation risk. That could keep pressure on mortgage rates.

This is why the comments following the Fed meeting may ultimately matter as much as the rate decision itself.

I've Seen This Movie Before, But It's Not the Same Movie

Seeing the 10-year Treasury above 5% again brings back a lot of memories.

I remember being 27 in San Francisco watching the bond market in 2007.

I remember Countrywide.

I remember the mortgage companies disappearing.

I remember short sales.

I remember foreclosures.

And I remember the opportunities that eventually appeared when almost nobody wanted to buy.

Nearly two decades later, I don't know exactly what happens next.

I'm not the Lord. I don't have foreknowledge, and there's no crystal ball sitting on my desk.

But I do know that 2026 is not 2007.

The mortgage system is different. Homeowner equity is different. Housing supply is different. Lending standards are different.

We're going through a market adjustment, and adjustments can be uncomfortable.

They can also create opportunities.

The important thing isn't predicting the future perfectly.

It's understanding the market you're actually in.

I'll publish my normal weekly market recap after we've seen the Federal Reserve's decision and, more importantly, how the bond market responds.

If you have questions about what today's market means for buying, selling or refinancing, reach out. I'm happy to run through the numbers with you.