A negative impact of the election on the housing market

[Late_Bloomer]

At least in my personal case...

We are in the process of closing on a home in which we locked in the APR two days before the election @2.75%. We ran into an issue where the sellers needed to close by Dec 10, but USAA couldn't close any earlier than the 16th. During our scramble for a solution, our lender put us in touch with her creditor to see if we could get a faster close. Although they can do it, I was informed at that time that since election night, the rates spiked sharply and I was now looking at a 3+ for 15 yr. and 4+ for 30 yr. Well, fuck that I say.

The sellers are saying they've had a vacation planned for the end the year and can't budge on the date. At first it was looking like we were going to lose the home, but luckily, they decided at the last minute to postpone their vacation by a few days and have a POA sign for them on the 13th, the earliest USAA could close by.

We're hoping all goes smooth from here forward because if we do end up not being able to close this deal, We won't be looking at other homes for quite some time, at least until the rates re adjust and come back down. And who knows when that will happen as Trump unleashes his master plan to make America great again. Something I don't put much stock in.

[Metric Mouse]

Wow. Hope this works out for you. I wonder if higher interest rates are good long-term; this could be related to the expected Fed. rate increase in December, as well.

[Indexer]

Before bailing because the rate changed 0.25-0.5% see what buying a point would cost. It might be a few thousand dollars, but honestly rates might 'keep' going up. If you are waiting for mortgage rates under 3% again you might never see them, ever. These are historically low rates. They could happen again, but there is a chance they might never happen again. Get it while you can.

Reasons rates might keep going up in order of importance.
1(and this trumps Trump). The fed has already signalled they are likely to raise rates in December.

2. Trump's spending plans. He wants to increase spending on infrastructure, the military, etc. This can lead to inflation, which leads to higher rates.

3. Trump's tax plans. He wants to lower taxes substantially. Combined with 2, you are looking for the potential for inflation, but also a lot more borrowing. More government borrowing will likely to lead to higher rates, especially if the Fed isn't buying the debt to keep the rates low, which they likely won't be(see #1).

4. There isn't a non-political way to say this. The stupid things that come out of Trump's mouth. During the campaign Trump talked about renegotiating the US government debt. I could write a paper on how stupid this is. Luckily, so could Trump's advisors and they had him walk it back immediately. Then he said it again a couple weeks later. If he said something like that after winning the election, when people would actually take him seriously, you might see interest rates spike even more. Expect them to be volatile up until he takes it back again.

[arebelspy]

We won't be looking at other homes for quite some time, at least until the rates re adjust and come back down.

What makes you assume they will?

If the sellers caused me to have a rate jump, I'd negotiate the difference in purchase price (so payment amount stayed the same, just lower principal = more to interest, due to the higher rate).

If they decline, mutually part ways, unless the higher payments are worth it to you.

I wouldn't be trying to time the interest rate market though, personally, other than potentially refi'ing at some point if I noticed the rates were lower than mine, and it was worth doing so.

[Metric Mouse]

Before bailing because the rate changed 0.25-0.5% see what buying a point would cost. It might be a few thousand dollars, but honestly rates might 'keep' going up. If you are waiting for mortgage rates under 3% again you might never see them, ever. These are historically low rates. They could happen again, but there is a chance they might never happen again. Get it while you can.

This.

4. There isn't a non-political way to say this. The stupid things that come out of Trump's mouth. During the campaign Trump talked about renegotiating the US government debt. I could write a paper on how stupid this is. Luckily, so could Trump's advisors and they had him walk it back immediately. Then he said it again a couple weeks later. If he said something like that after winning the election, when people would actually take him seriously, you might see interest rates spike even more. Expect them to be volatile up until he takes it back again.

Interesting. Could you explain the rationale behind renegotiating the debt and mortgage interest rates rising? I'm just not able to piece it together on my own for some reason.

[BlueMR2]

We're hoping all goes smooth from here forward because if we do end up not being able to close this deal, We won't be looking at other homes for quite some time, at least until the rates re adjust and come back down. And who knows when that will happen as Trump unleashes his master plan to make America great again. Something I don't put much stock in.

Adjust and come back down you say?  Rates were abnormally low.  This *may* be the beginning of an adjustment back towards historical norms...

[Mr. Green]

We're hoping all goes smooth from here forward because if we do end up not being able to close this deal, We won't be looking at other homes for quite some time, at least until the rates re adjust and come back down. And who knows when that will happen as Trump unleashes his master plan to make America great again. Something I don't put much stock in.

Adjust and come back down you say?  Rates were abnormally low.  This *may* be the beginning of an adjustment back towards historical norms...

Agreed. Everyone has been saying rates are going to go up for the last 5 years and it just hasn't happened yet. What goes down, must go up and with the Fed starting to raise rates I'd bet my money that the trend is headed higher.

[BudgetSlasher]

At least in my personal case...

We are in the process of closing on a home in which we locked in the APR two days before the election @2.75%. We ran into an issue where the sellers needed to close by Dec 10, but USAA couldn't close any earlier than the 16th. During our scramble for a solution, our lender put us in touch with her creditor to see if we could get a faster close. Although they can do it, I was informed at that time that since election night, the rates spiked sharply and I was now looking at a 3+ for 15 yr. and 4+ for 30 yr. Well, fuck that I say.

Where are you in the process? Since you say in the process of closing, I assume there is a contract in place. The contract should control (other than closing date not being a deal breaking term), so did you set the 16th as your date to close, is the mortgage taking longer to approve than normal, are you just letting the date float? Sellers can be idiots when it comes to closing; when we bought this house the seller wanted to close and remain in the house (no way in hell) and finally agreed to close in the morning of the day we had agreed to since the contract was signed because they needed the money to pay of their mortgage and close on another house hours later in a different city (because nothing ever goes wrong and delays a closing).

4. There isn't a non-political way to say this. The stupid things that come out of Trump's mouth. During the campaign Trump talked about renegotiating the US government debt. I could write a paper on how stupid this is. Luckily, so could Trump's advisors and they had him walk it back immediately. Then he said it again a couple weeks later. If he said something like that after winning the election, when people would actually take him seriously, you might see interest rates spike even more. Expect them to be volatile up until he takes it back again.

Interesting. Could you explain the rationale behind renegotiating the debt and mortgage interest rates rising? I'm just not able to piece it together on my own for some reason.

I assume that you accept that if rates increase on US debt mortgage rates go up (points 1-3). My understanding is mortgage rates tend to follow bond rates or at least the 10-year treasuries (high demand low yield falling rates / low demand high yield rising rate). If you were investing wouldn't you want a slightly higher return for the increased risk and uncertainty.

We're hoping all goes smooth from here forward because if we do end up not being able to close this deal, We won't be looking at other homes for quite some time, at least until the rates re adjust and come back down. And who knows when that will happen as Trump unleashes his master plan to make America great again. Something I don't put much stock in.

Adjust and come back down you say?  Rates were abnormally low.  This *may* be the beginning of an adjustment back towards historical norms...

Agreed. Everyone has been saying rates are going to go up for the last 5 years and it just hasn't happened yet. What goes down, must go up and with the Fed starting to raise rates I'd bet my money that the trend is headed higher.

I also agree. Rate are at historic lows, other than a spike from '79 into the 80's the rates have floated between ~6 and ~9 (http://www.freddiemac.com/pmms/pmms30.htm) until 2009 when they began the slide toward the 3.xx by 2012 where they have remained.

If they climb, we may not see rates this low again and I believe that if we do it will not be anytime soon (think children or grandchildren's time). Then again we could find ourselves in a long term low interest rate environment like Japan in which case these rates or lower may be here for much longer. Or now that certain government actions have been taken to address a financial downturn (which contributed to the low mortgage rates) are in the toolbox, there is no guarantee that they won't be used again with similar impacts on mortgages rates.

[Metric Mouse]

4. There isn't a non-political way to say this. The stupid things that come out of Trump's mouth. During the campaign Trump talked about renegotiating the US government debt. I could write a paper on how stupid this is. Luckily, so could Trump's advisors and they had him walk it back immediately. Then he said it again a couple weeks later. If he said something like that after winning the election, when people would actually take him seriously, you might see interest rates spike even more. Expect them to be volatile up until he takes it back again.

Interesting. Could you explain the rationale behind renegotiating the debt and mortgage interest rates rising? I'm just not able to piece it together on my own for some reason.

I assume that you accept that if rates increase on US debt mortgage rates go up (points 1-3). My understanding is mortgage rates tend to follow bond rates or at least the 10-year treasuries (high demand low yield falling rates / low demand high yield rising rate). If you were investing wouldn't you want a slightly higher return for the increased risk and uncertainty.

Ahh. Thank you for explaining.

[MidWestLove]

As others mentioned, it is less an impact of election and more consequences of adjustments in interests rates that Fed talked about for many years as wanting to do.  For a lot of us who are investors or anyone trying to live on fixed income (retired persons), it is a very welcomed  sign and we wish Fed would hurry up. Will it cool down some of the real estate (especially at the lower tiers where people are stretching their affordability)?  may be. should it prevent you from buying a home , given how extraordinary low rates are ? it shouldn't. 

as a reference, I remember refinancing work/conversations in 90s where rate below 7% for 30 year was just awesome. if you are given 3-4% now, rate it and run with it (assuming you want the house). 

[aspiringnomad]

It's primarily a reaction to the election, as Fed actions were mostly priced in. Trump has promised to cut taxes and spend a lot, potentially ballooning the deficit, which unnerved the bond market enough to push the 10-year off historic lows. Even with this spike, the cost to borrow money is still cheap by historical standards.

Since Trump can't unilaterally try to renegotiate our debt (one among the many "finer points" of governing he has yet to learn), I doubt markets were responding to that concern at all.