I previously talked about a “wait-and-see” approach some buyers are taking, holding out for two key events: the Fed meeting and the election results. The Federal Reserve did deliver a rate cut of a quarter point, a move many expected would give buyers a break. But instead of mortgage rates easing, they’ve crept upward. So what’s driving this unexpected shift?
1. Election Results & Economic Policies
With the election settled, specific policy directions are becoming clearer. Trump’s proposed tariffs are back on the table, and they’re likely to lead to higher inflation. When tariffs go up, so do the prices of many goods – and this affects inflation across the board. Mortgage rates, which are sensitive to inflation, often rise to compensate for the declining purchasing power that comes with higher inflation.
2. The Stock Market’s Response
Interestingly, the stock market has surged post-election. While this signals optimism to some, it doesn’t necessarily bode well for mortgage-backed securities (MBS). When investors flock to stocks, they often pull away from the bond market, where MBS are traded. This shift reduces demand for MBS, making it harder for mortgage lenders to offer lower rates.
What This Means for Buyers
If you’re in the market to buy, this scenario means that, despite the Fed’s intentions, market dynamics are pushing rates upward. Mortgage rates may not ease up until we see a cooling in stock performance or a shift in inflation expectations.
While it may feel like a tough time to buy, it’s worth noting that many people successfully purchase homes even in fluctuating markets. Let’s discuss your options to ensure you’re ready to act when the right home comes along.
Stay tuned for more updates, as this market will likely continue to surprise us.
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