April 26, 2023, home in Chicago’s south suburbs.
Brian Casella | Brian Casella Forum News Service | Getty Images
President-elect Trump’s victory spurred a rise in U.S. 10-year Treasury yields. Mortgage rates, which loosely follow benchmark yields, are also climbing.
The average 30-year fixed mortgage rate surged 9 basis points to 7.13% on Wednesday, according to Mortgage News Daily. That was the highest level since July 1 this year, although it fell short of the rise some had expected.
“The expectation among bond traders heading into the election is that rates will move higher if Trump wins, especially a landslide victory. While the latter is unclear, the former would be enough to send rates already rising again in the event of a Trump win. The odds are popping up,” said Matthew Graham, chief operating officer of Mortgage News Daily.
Real estate stocks also responded, with major public builders and building materials companies falling sharply. leinard, Dr. Horton and Pulte Group All stocks were down about 5% in midday trading Wednesday. Retailer home depot and Lowe’s There has also been a decline, each down by about 3%.
“Builder stocks are highly sensitive to mortgage rates and mortgage rate expectations. Inflation expectations are higher now, and that affects long-term interest rates,” said John Burns, CEO of John Burns Real Estate Consulting.
While Trump did not lay out a detailed housing plan, he did talk about deregulation and opening up federal lands for more housing construction.
National Association of Home Builders President Carl Harris issued a statement congratulating the president-elect, saying: “The National Association of Home Builders looks forward to working with the incoming Trump administration and bipartisan leaders in Congress to enact legislation that supports housing. and regulatory policies.
Big builders have been cutting mortgage rates for their customers, but that’s cutting into their profits.
Mortgage rates hit a recent low of 6.11% on September 11, but have been rising steadily since then despite the Federal Reserve’s recent rate cuts. Mortgage rates do not follow the Fed, but react to the Fed’s view of the economy. Stronger-than-expected economic reports in September and October sent bond yields and mortgage rates higher.
From a consumer perspective, if a homebuyer purchases a $400,000 home with 20% down on a 30-year fixed mortgage, the monthly payment in early September will be $1,941. Today, that amount would be $2,157, a difference of $216.
Existing home sales experienced an unusual surge this fall. Pending sales, which represent signed contracts, were up 7% in September from August, according to the National Association of Realtors. That was before interest rates rose significantly.
The growth in sales volume was mainly due to increased supply. Active homes for sale increased 29.2% in October compared with October 2023, reaching the highest level of active inventory since December 2019, according to Realtor.com.
Graham added: “The path ahead is anyone’s guess and will ultimately be determined by inflation, the economy and Treasury issuance.”
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