Mortgage Rates Rise Following Trump’s Election
Many in the real estate industry were cautiously optimistic following the election of Donald Trump on November 8. For the first time, a real estate titan will occupy the Oval Office and Mr. Trump, it has been argued, will be good for real estate. His policies should favor our industry. For example, Mr. Trump has campaigned against Dodd-Frank, promising to repeal the law. He has promised to roll back government regulation of the financial industry allowing banks more freedom to make loans. And, he has promised to cut taxes.
The immediate impact following Mr. Trump’s election has been record high closings on the stock exchanges. Investors seem to be encouraged by the possibilities ahead. However, the opposite seems to be happening with mortgage rates. Since election day, mortgage rates have been slowly climbing. 30-year fixed rate mortgages were, on average on election day, 3.57%. But, just last week, the average 30-year fixed rate mortgage was advertised at 4.03%, the highest since July of 2015. While this rate is still historically low, the trends indicate that rates will continue to climb for the foreseeable future. Rates are climbing despite the fact that the President Elect has yet to announce any new or concrete economic proposals or spending cuts. The markets are simply reacting to campaign promises and rhetoric.
What is likely to happen following inauguration day? Bond rates have also been climbing since election day. 10-year treasury notes have risen from 1.85% to 2.24% in the week following the election. This causes rates to rise and experts expect these rates to continue to rise. Additionally, the Federal Reserve continues to suggest that it will raise its rates at an upcoming meeting. This will also affect mortgage rates. After inauguration, we can expect mortgage rates to continue to tick up as a result of these factors. Unless Mr. Trump makes a radical change in policies, the trend will continue.
In the short term, buyers will scramble to close on new homes quickly, hoping to catch rates while they remain low. But, as rates increase, homes will become less affordable for buyers and sales will begin to slow. By the end of 2017, some predict that housing inventory will begin to increase and prices will begin to fall.
The first real estate president will have a great influence on our industry. But it may not be what we have expected. It might be negative. Rate increases and severe tax cuts could lead to rising inflation. It might not simply be higher mortgage rates that we have to worry about. The residential sector should begin to brace.
Sorry, the comment form is closed at this time.