Home buyers may have to wait until 2025 for mortgage rates to decrease. The average 30-year mortgage rate rose to 6.84% last week, continuing its consistent weekly increase since September.
The moderate housing market during the past two years doesn’t yet appear to be gathering major momentum. When the Fed began slashing rates in September, many hoped it would be the catalyst to get home buying moving again.
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However, uncertainty surrounding the incoming Trump administration’s planned economic policies appears to be creating speculation that the Fed may not proceed with another interest rate cut in December.
Whether the Fed cuts interest rates again by the end of the year will likely depend largely on the November Consumer Price Index (CPI) report and further economic analysis of Trump’s proposed tariffs and immigration policies.
And, as explained below, the election results have also resulted in a disparity in housing market optimism between registered Republicans and Democrats.
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Trump tariffs and immigration crackdown fuel fears of inflation and climbing mortgage rates
The average 30-year mortgage rate increased again last week to 6.84%, showing a consistent increase for the past two months. Many economists note concern over certain Trump policies that they fear could worsen inflation and may be fueling uncertainty in the housing market.
During the election, both candidates focused on addressing the housing crisis with different housing initiatives to bolster the market from the supply side. Now, experts note that Trump’s strict immigration and deportation plans might adversely affect the labor market, and tariffs could cause inflation to rise.
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Sabrina Speianu, Economic Manager at Realtor.com, writes, "Concerns over inflation, driven by potential tariffs and rising labor costs due to reduced immigration, initially caused interest rates to rise post-election.”
The policies that are implemented could have a dramatic impact on how the economy performs next year and, subsequently, the Fed's course of action on interest rates.
However, mortgage rates may still fall even if inflation ticks up again. The 10-year treasury yield, which is more influential in shaping mortgage rates than the federal funds rate, tends to decrease during economic uncertainty as more people flock to bonds for stability.
If the treasury yield goes down, mortgage rates will likely follow suit.
Election outcome is impacting buyer and seller optimism
Overall confidence in the housing market seems also to have been affected by the Trump presidential win. Though the election results didn’t directly impact how all consumers view the housing market, there was a notable difference worth observing.
Related: Dave Ramsey has blunt words on mortgage rates and buying a home now
Unsurprisingly, those in favor of Trump’s policies are more likely to view the housing market outlook positively, and those who did not vote for him now view it negatively. 24% of Democrats surveyed by Realtor.com said they were now less likely to buy a home in the next year because of the election, while 18% of Republicans noted they were now more likely to do so.
This sentiment is tied closely to how each party views Trump's economic policies. Morning Consult found that Republican consumer sentiment rose almost 30% following election day, while Democratic consumer sentiment fell 13%.
Consistent with most of the election’s reported voting patterns, men and Gen Z were also more likely to perceive their chances of buying a home positively under a Trump administration than any other demographic.
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