How the Election Affects the Housing Market

How the Election Affects the Housing Market

After Hillary Clinton’s defeat became evident, and Donald Trump became our president-elect, markets started going a bit haywire. Overnight trading in stock market futures, which provides a speculative and hedging market for what the stock market will open at the next day, started sinking precipitously. However, by morning, everyone had changed their tune and the stock market opened nominally down, finishing the day strongly up and near new all time highs.

Meanwhile, something we have not seen in a while started to happen: interest rates started rising with tremendous velocity. The U.S. 10 Year Treasury is yielding 2.1% from 1.8% days earlier. Interest rates are set by a market of buyers and sellers, and no one always knows what drives their decisions. It is difficult to read the tea leaves of why China is buying or selling our government debt, but those rates effect your mortgage rate. It is also one of the largest reasons the US homeowner is capable of borrowing at such low rates! We have the entire world looking to put dollars into mortgages.

But what does this all mean for the future? Today, it’s difficult to paint an accurate picture. If inflation (the rate goods and materials go up in price) remains somewhat low, which still seems likely, rising interest rates reflect a new optimism in the American economy. For the mortgage business, refinances might decrease, and financing rates may go up, but if the economy is doing better, the housing market will be right there with it.

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