How Will the Election Impact the Housing Market?

HiResThere has been a lot of discussion about how the election may impact the housing market and home owners have been asking a lot of questions.  For many, the item top-of-mind is mortgage rates. Will they go up? If so, how high? Should I re-fi now?  The truth is, even before the election results were in, the Federal Reserve was hinting at increasing interest rates, citing the U.S. economy was finally stable enough to handle the bump. That said, views are mixed in regards to what lies ahead and it has little to do with who you voted for.

Just after the election, Forbes contributor, David Trainer, an independent researcher, believes mortgage rates will likely stay low, despite a slight uptick after the vote.  He believes, despite previous trends, our recent economy has sparked a “new normal” and now it’s the market, not the Fed, ultimately dictating how rates will respond. Historically, homeowners tend not to make big moves when the market is uncertain.  In turn, how consumers respond to real estate impacts other sectors like employment and investments, so the Fed may choose to respond accordingly.  On the other side, experts with CNN Money do predict an increase coming after the Fed meets in December.  The article qualifies this by saying an increase will likely be with short-term rates as 30-year loans are still quite low comparatively.

Ultimately, it still is too early to call according to Janet Yellen, Federal Reserve Chairwoman, in a recent New York Times article. Yellen admits the true economic impacts of the Presidential election are not fully understood at this time. More recently, Business Insider indicated the Fed is leaning towards increasing rates, citing an excerpt from the November’s meeting minutes: “Most participants expressed a view that it could well become appropriate to raise the target range for the federal funds rate relatively soon, so long as incoming data provided some further evidence of continued progress…”.

The takeaway, homeowners and buyers should aware and cautious.  The economy will dictate home price increases, as well as the direction of mortgage rates.  Still, while rates may rise, they are still comparatively low overall.  Also, as the economy improves, so would home valuations.  McCleary Group will do its best to answer any questions its clients may have. Feel free to reach out to the team here.


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