Mortgage Market Update - 10/28/2024

The Election is Here! Do I Lock or Float ??

October 26, 2016, marked one of the most pivotal moments of my life.

I can still recall the anticipation, feeling like a kid on Christmas morning, as I waited for news on my first real estate investment offer! Early that morning, the call finally came—I’d gotten it! Even now, I get goosebumps remembering the flood of emotions. Achieving this goal was something I’d aimed for since starting in this industry in 2008.

Not long after, I faced a decision every property owner encounters: should I lock in my rate now or float until closing?

At that point, I had been in the mortgage business for eight years. With the contentious Trump vs. Clinton election just two weeks away, I was convinced by media coverage that rates might drop post-election. I consulted with colleagues, listened to numerous market "experts," and ultimately decided to "float" my rate, planning to lock closer to closing after the election.

That turned out to be a costly mistake.

Below is a snapshot of mortgage rates from when I went under contract, showing the impact of that pivotal 2016 election:

I remember feeling embarrassed about my decision to delay locking in my rate. In under 30 days, my rate had surged by nearly 0.75%! In my eight years in the business, I’d never witnessed the market shift so dramatically in such a short time. And, just my luck, this mortgage rate market nosedive occurred during one of the most significant financial transactions of my life. ???

Right after my purchase, I was determined to understand how I’d misjudged the rate outlook so much. I dove into online research, trying to figure out what had happened. I learned that the period leading up to and following an election can be one of the most volatile times for the market. Large swings in mortgage rates are unusual in “normal” conditions, but during a contentious election year, anything can happen.

Key Takeaway: Rates have surged sharply over the past few weeks, with extreme and unpredictable movements—a pattern often seen before and after a contentious election. The next 60 days are likely to remain volatile, with greater stability anticipated as we move into 2025.

Are Rising Odds of a One-Party Sweep Moving Rates Higher ??

Kreg and I make it a priority to avoid political discussions, as our focus is on sharing the latest and greatest updates affecting the mortgage and real estate world.

However, at times it's unavoidable to touch on the political landscape, especially when it has a direct impact on our industry. Please know that our goal is simply to inform you about the factors that are currently influencing rates ??

I began this newsletter by sharing my 2016 investment blunder to show that we've navigated this mortgage rate roller coaster before. That experience during the 2016 election year has been ingrained in my skull forever. As rates spiked again this week, it felt like déjà vu—the market is reacting just as it did after the 2016 Trump victory. Check out this Washington Post article from November 2016 titled, "Mortgage rates spike to near yearly highs following Trump victory." The article does a great job explaining why mortgage rates jumped once Trump was elected.

Trump's victory was seen as pro-business and pro-economy. Once Trump was elected president, investors flooded the stock market and pulled out of the bond markets. Treasury yields skyrocketed and caused mortgage rates to spike (remember, when treasury yields go up, mortgage rates follow). Many dubbed this time as the "Trump Tantrum".

Recently, Treasury yields and mortgage rates have been rising, similar to what we saw post election in 2016. Some people credit this reaction to strong economic data, while others think the market is preparing for another "Trump Tantrum," expecting a potential "red wave" victory in November. A recent MarketWatch report effectively outlines the implications of a one-party election outcome that could increase our deficit.

I lean toward the latter perspective, as there’s little justification for the rapid increase in mortgage rates over the past few weeks. Average rates have climbed from 6.20% on October 1, 2024, to 6.90% today.

No matter who wins the election in the coming weeks, a split government won't necessarily be a bad thing for the bond market and mortgage rates. Such a scenario would limit either party's ability to spend like drunken sailors and pass legislation without checks and balances. Bringing in a healthy dose of fiscal responsibility and debt control would benefit everyone in the long run.

Key Takeaway: Mortgage rates spiked this week as the market attempts to factor in the potential election outcomes. If the election leads to a split government, we can expect mortgage rates to stabilize since neither Trump nor Harris will be able to spend freely or easily increase the government deficit. Higher government spending will only need to higher inflation, which will lead to higher interest rates.

Exclusive Interview with CEO of NextHome, James Dwiggins

We love bringing our partners access to the big dogs in the housing market ??

This Wednesday is no exception. On October 30th from 2 - 3:00PM EST, my friend and coach Tommy Choi will be interviewing James Dwiggins, CEO of NextHome, in a more interactive session. They are going to role play scenarios to help you navigate the recent changes to the Buyer Broker Agreement and discuss how to adopt a more Client-Centric Practice (CCP) in your business.

Make sure you click the link below to register. If you have trouble registering, reach out!

REGISTER

This is a private, exclusive event that we’ve opened up to our Realtor partners and we’d love to see you there.

Instagram Reels from the Week

• If You See a Home on the Market for 30+ Days, Do This