According to all the so-called experts and conventional wisdom, interest rates are on the rise because Donald Trump’s was elected to be the next President of the United States. We’re already seeing a sharp decline in refinancing activity and a drop in home sales. This is all because rates jumped up about 20 basis points in the last week. OMG, they’re almost at 4%. How will we survive?
If I’m not mistaken, this should come as no surprise to anyone. The Fed had all but officially announced a rate hike for December and based on the growth in the economy was already planning additional hikes in 2017. Could it be that these hikes are now being priced into the market, and would have been regardless of who got elected?
It makes good press, at least for some, to blame the President-elect for the rate hikes. We gotta blame somebody. Couldn’t it be the natural order of things?
Home sales normally decline around this time of year. So, it should be no major surprise they are down slightly. In addition, due in part to all of the prior refinances, there are fewer homes up for sale. Of those still available, even fewer are in the affordable range for first-time and low to moderate income home buyers. This also stifles home purchases.
Let’s not get bogged down in all the political rhetoric and speculation. You’d think we would have learned our lesson by now. The markets are forecasting a stronger economy under the new administration. That’s a good thing. That means more jobs and better wages. That’s good for everybody. As a result, interest rates will rise. That means fewer refi’s and initially a slowdown in home purchases. Just the way it is.
A better outlook for employment and income potential usually increases consumer confidence; allowing consumers to look to move up or buy their first home. More people will buy homes in a rising economy. That’s good for the consumers, the economy, and the housing industry. Don’t worry, if the economy doesn’t improve, the rates will once again decline, but let’s all hope that doesn’t happen.
So, let’s stop looking at everything from a glass half empty perspective. If we want a better economy, with more opportunity for employment and wage growth, we need to expect and tolerate higher interest rates. Let’s face it, we all knew it would happen and we should have been preparing for it all along.
Ironically, I still hear ads on TV and the radio for refinancing, but very few for home buying or financing. Maybe, it’s time to target those who may benefit from a stronger economy and tout the opportunities to buy, and the benefits of owning a new home.