Following Donald Trump's recent election victory, significant shifts are occurring across the housing and finance markets. On November 6, 2024, the former president's successful campaign triggered notable reactions from financial markets, particularly affecting mortgage rates and housing stocks.
The average rate on the 30-year fixed mortgage surged, climbing 9 basis points to 7.13%, marking its highest level since July, according to Mortgage News Daily. Matthew Graham, the COO of the company, noted, "The expectation among bond traders coming to the election was for rates to move higher following Trump’s victory, especially after the red sweep of congressional seats." This rise reflects the broader anticipatory market behavior surrounding Trump's return to the presidency.
Market analysts reported substantial declines among housing stocks, which reacted sharply to the rising mortgage rates. Major players such as Lennar, D.R. Horton, and PulteGroup saw their shares drop by over 4%. John Burns, CEO of John Burns Real Estate Consulting, pointed out the sensitivity of builder stocks to fluctuations in mortgage rates, stating, "The builder stocks are highly sensitive to mortgage rates and mortgage rate expectations." He also indicated rising inflation expectations were contributing to the pressure on long-term rates.
Despite the predictions of declining stocks, optimism was expressed by the National Association of Home Builders (NAHB). The chairman, Carl Harris, stated, "NAHB looks forward to working with the incoming Trump administration and leaders from both parties to enact policies aimed at increasing the nation's housing supply and addressing affordability issues." This sentiment showcases the hopes of some industry stakeholders for what could emerge from Trump's policies concerning housing.
While Trump's campaign did not present a comprehensive housing plan, previous discussions hinted at potential deregulation and utilizing federal land for construction purposes, both of which could have long-term impacts on the housing market.
The impact of rising mortgage rates has been significant for potential buyers. A homebuyer purchasing a $400,000 home with a 20% down payment would have seen their monthly mortgage payment increase from approximately $1,941 to $2,157 —a difference of $216— since earlier this fall when rates were at 6.11%.
Interestingly, even amid rising rates, the housing market experienced unusual activity. Early fall recorded increased home sales, driven largely by heightened inventory levels. Realtor.com data revealed there were 29.2% more homes listed for sale compared to the same time last year, reaching the highest available inventory since December 2019. This trend suggests some buyers are moving forward, perhaps spurred on by the influx of available properties.
Graham mused about the uncertain future stating, "The path forward remains uncertain and will depend largely on inflation and broader economic conditions." The forthcoming months will prove pivotal as the market grapples with the dual pressures of increased mortgage rates and economic indicators pointing toward potential changes.
Meanwhile, the broader stock market reacted positively to Trump's victory, with the Dow Jones Industrial Average skyrocketing by 1,507 points to reach record highs, its first gain over 1,000 points since 2022. The S&P 500 and Nasdaq also climbed, increasing by 2.5% and 2.95%, respectively. This rally can be attributed to the speed of the election results and the market’s craving for certainty.
Total market stabilization after initial uncertainty is expected to allow businesses to plan and hire accordingly. Many analysts are optimistic as this stability often leads to increased consumer confidence and spending, threading through the economy.
DFW's financial scene was similarly invigorated by Trump's re-election, with many Fortune 500 companies seeing stocks soar. Companies like AT&T, Caterpillar, and McKesson experienced considerable gains throughout the day. Notably, Tesla's stock gained about 14%, spurred by the close ties between CEO Elon Musk and Trump, hinting at regulatory advantages for electric vehicles under the new administration.
Despite the upbeat atmosphere among large corporations, some industries faced pressure. Homebuilders and real estate firms like D.R. Horton and CBRE Group felt the weight of surging mortgage rates, witnessing declines of 4% and more. This outcome emphasizes the complex interplay between higher interest rates and the housing stock performance.
Another factor influencing the broader economic mood is the anticipated interest rate decision by the Federal Reserve, set for November 7. Financial stocks rose due to expectations of regulatory changes and potential rate cuts aimed at stabilizing economic growth.
The market's volatile reactions to election outcomes are not novel. Historical patterns have shown similar behavior during pivotal elections, consistently linking political changes to immediate financial repercussions. Views from both sides of the aisle reflect doubt and optimism about future housing policy directions.
The coming weeks are sure to reveal more about how the housing sector adapts to these financial shifts. Analysts caution, though, the future still encompasses uncertainty. Graham captured this sentiment accurately when he stated, "The path forward is anyone's guess" as interwoven variables like inflation and economic reports dominate the immediate horizon.
Regardless, stakeholders keep their fingers crossed as they navigate this newly established political and financial terrain, hoping for clear signals from the Trump administration's policies and actions concerning housing regulation.
