What Is Happening?
Based on the election results last night, the majority of Americans who voted elected Donald Trump. There were many issues on the table, and the “big one” was the economy. The economy has been on everyone’s mind for the past several years, with inflation spiking over 9% at one point, and unemployment has risen to its highest point in 4 years. Americans sent a message that they had more confidence in Trump fixing the economic whoa that we seem to be facing at this time. Our “Wall Street Warriors” were also betting on Trump winning as they have pushed the US 10-year treasuries from almost 3.60 in mid-September to its current level of over 4.40%, and this included a FED cut of .50 during the same time frame. This spike in the 10-year treasuries has pushed 30-year mortgage rates back over the 7% mark after testing the 6% mark earlier this year.
So, you might now be asking yourself… what is happening? We voted for the guy who we think will improve the economy and what did we get? Wall Street pushing rates notably higher in less than 2 months. Needless to say, this rapid rise in mortgage rates has brought home sales to a screeching halt, and home sales are a big part of our economy. However, if you think about the thought process of our “warriors,” the answer is quite simple… well, sort of. The thought is that the Trump administration will turn things around on the economy by creating jobs, lessening taxes, and putting more money in our pockets. If this were true and happened instantaneously on January 20, when he takes office, then the move to higher rates makes sense. The thought is that more jobs mean more people making money, and if more people are making more money either by having a job or paying less in taxes, then they spend more money. All are good things, right? Well, maybe… the problem with this is that it would also create the possibility of inflation as more demand tends to push prices up, and interest rates hate inflation. Inflation is up… rates are up… simple Econ 101.
But the flaw in our “warriors’” thought process is that these changes by the Trump administration will not just happen on January 20, 2025. The potential policy changes, the “drill baby drill” activity, tax cuts, and other stimulus packages will take time to get passed even if the “Red Sweep” in the House and Senate happens. There are many things on the Trump agenda to put in place, and it will not all happen on January 20th. It will simply take some time. In the meantime, we will continue to see the economy slow, especially at current interest rates, which need to go lower.
Bottom line… our “warriors” will return to looking at actual economic data, which will ultimately show we are still in a slowdown that will take months to come out of. This should bring rates back down over the next six months. The key is for overall current inflation to continue its move to lower levels, which I believe will happen, and this should bring mortgage rates back down over time.
Remember… the BEST RATE… IS A LOCKED RATE… with a float down… ask me about our program that allows you to lock your rate and then float down if rates move lower.
Make sure you (or your buyer) get pre-approved before looking at homes so we can determine if you are looking in the correct price range and have you armed to submit an offer with a pre-approval letter!
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Blog post date: Thursday, November 7, 2024
