Mortgage Rates Soar as Trump Victory Sparks Economic Shift
The recent presidential election has sent shockwaves through the US economy, with mortgage rates experiencing a significant surge. The 30-year fixed mortgage rate has jumped 9 basis points to 7.13%, the highest level since July 1st. This sudden increase has left many wondering what the future holds for the housing market.
Rising Rates Impact Housing Stocks
As mortgage rates climb, housing stocks have taken a hit. Major builders such as Lennar, D.R. Horton, and PulteGroup have seen their shares plummet by over 4%. Retailers like Home Depot and Lowe’s have also felt the pinch, with their stocks falling by more than 3%. According to John Burns, CEO of John Burns Real Estate Consulting, “The builder stocks are highly sensitive to mortgage rates and mortgage rate expectations. Inflation expectations are higher now, which impacts long-term rates.”
Trump’s Housing Plan: A Mystery Yet to be Solved
While President-elect Trump has spoken about deregulation and opening federal land for more home construction, the details of his housing plan remain unclear. The National Association of Home Builders has expressed its willingness to work with the new administration to address the nation’s housing supply and affordability issues.
Big Builders Feel the Pinch
To attract customers, big builders have been buying down mortgage rates, but this strategy has come at a cost. Their profit margins have taken a hit as a result. With mortgage rates on the rise, these builders may need to rethink their approach.
Consumers Feel the Impact
For homebuyers, the rising mortgage rates translate to higher monthly payments. A $400,000 home with a 20% down payment would now require a monthly payment of $2,157, up from $1,941 in early September. This increase of $216 per month may make homeownership less affordable for some.
Sales of Existing Homes: A Temporary Surge?
Despite the rising mortgage rates, sales of existing homes have seen an unexpected surge this fall. However, this trend may not last. With pending sales rising 7% in September, the question remains whether this growth can be sustained in the face of increasing mortgage rates.
The Road Ahead: Uncertainty Reigns
As the economy continues to evolve, one thing is certain – uncertainty. The path forward will be shaped by factors such as inflation, the economy, and Treasury issuance. Only time will tell how these forces will impact the housing market and mortgage rates.
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