President-elect Donald Trump's victory sent 10-year US Treasury yields higher. Mortgage rates, which loosely track benchmark yields, are also rising.
The average interest rate on a 30-year fixed mortgage rose 9 basis points on Wednesday to 7.13%, according to Mortgage News Daily. This is the highest rate since July 1 of this year, although it is not the rise some had expected.
“The expectation among bond traders coming into the election was that interest rates would move higher if Trump won, especially a red sweep. While the latter is not yet clear, the former is enough for a further increase in interest rates that have already risen,” said Matthew Graham, CEO For Operations at Mortgage News Daily: “Suddenly With Trump's Chances of Winning.”
Home stocks reacted in turn, with shares of major public builders and building materials companies falling sharply. Lennar, Dr. Horton and Poltigroup All fell more than 4% in midday trading on Wednesday. Retailers Home Depot and Louie They also fell more than 3% each.
“Construction stocks are very sensitive to mortgage rates and mortgage interest rate expectations,” said John Burns, CEO of real estate consultancy John Burns. “Inflation expectations are higher now, which impacts long-term rates.”
While Trump has not laid out a detailed housing plan, he has talked about deregulating and opening federal lands to more home construction.
The National Association of Home Builders congratulated the president-elect with a statement from its president, Carl Harris, saying: “The National Association of Home Builders looks forward to working with the incoming Trump administration and leaders in Congress from both parties to enact pro-housing legislation and regulation.” “An agenda that increases the country's housing supply and alleviates the country's affordability problems.”
Big builders have been buying up mortgage interest rates for their clients, but that has squeezed their margins.
Mortgage interest rates recently bottomed at 6.11% on September 11, but have been rising steadily since then, despite a recent rate cut by the Federal Reserve. Mortgage rates don't track the Fed, but they react to the central bank's thinking about the economy. Stronger-than-expected economic reports in September and October caused bond yields and thus mortgage interest rates to rise.
To illustrate for consumers, a homebuyer purchasing a $400,000 home with a 20% down payment on a 30-year fixed mortgage would have had a monthly payment of $1,941 in early September. Today that payment would be $2,157, a difference of $216.
Existing home sales saw an unusual boom this fall. Pending sales, which represent signed contracts, rose 7% in September compared to August, according to the National Association of Realtors. That was before interest rates rose significantly.
The increase in sales is largely due to increased supply. There were 29.2% more homes for sale in October than in October 2023, reaching the highest level of active inventory since December 2019, according to Realtor.com.
“The path ahead is anyone's guess and will ultimately be determined by inflation, the economy and Treasury issuances,” Graham added.
