Post-election rates likely to seesaw

Here’s a look at the latest developments in the mortgage market for the week beginning 11/2/20.

• Rates dropped after Election Day, but volatility should be expected
• Residential construction spike signals opportunity for buyers
• Northeast home sales outperform overall market
• Renting vs buying: is it time to make the switch?

Rates dropped after Election Day, but volatility should be expected

With no clear winner emerging after Election Day, the mortgage market’s initial reaction to Tuesday’s ambiguous results was generally positive. Bonds rallied overnight and into Wednesday morning, driving prices of mortgage backed securities (MBS) up and interest rates down. The 30-year fixed-rate mortgage average fell to 2.78%, three points lower than before the election.

Market watchers shouldn’t find the response very surprising; a little uncertainty is usually good for rates. The instability that a prolonged, contested US presidential election would cause, on the other hand, could make rates very unpredictable in the coming days.

Too much disruption might scare investors away from even reliable assets like bonds, leading to a massive sell-off at distressed prices. When bond prices drop, rates tend to rise.

Even definitive results could very likely cause volatility, particularly if a single political party gained control of all three branches of government. Resolving the current legislative stalemate over the next stimulus package, for example, would lead to a quicker economic recovery and push rates back up from record lows.

With so many possible factors poised to change the mortgage landscape in the coming weeks, it’s hard to gauge the potential impact of the election’s aftermath. Home loan applicants should consider securing a rate when it makes financial sense to do so, rather than trying to time the market.

Residential construction surge signals opportunity for priced out buyers

While overall construction spending saw little movement, residential projects continued to build momentum early this fall. Chasing heavy demand from first-time homebuyers, private contractors poured $305 billion into new single-family homes—a 5.7% increase from August and a year-over-year gain of 8.2%.

Demand wavered a bit last month as steeply rising costs finally curbed sales, but a fresh supply of new built homes could tip the market in buyers’ favor. Priced out shoppers who’ve postponed their homebuying plans may want to prepare to make offers later this winter.

Northeast home sales outperform overall market

Nationwide homes sales dipped 2.2% this September, but one of the pandemic’s most impacted markets made a comeback. Even amidst urban flight from hubs like New York City, the Northeast was the only region to show improvement with sales up 2% from August’s numbers and an annual gain of almost 28%.

Renting vs buying: is it time to make the switch?

Homebuying interest has piqued among renters as more and more employers expand their work-from-home policies. Like any major life decision, though, transitioning from tenant to owner comes with a host of unique considerations.

To help first-timers determine if homeownership is the right move, the team at Better.com has developed a framework for weighing the pros and cons of renting vs buying.

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