Author: Eric BernsteinPublished:
We've been seeing a lot of the same themes for the last few months. Inflation continues to head towards the Fed's 2% goal. The economy is cooling as jobless claims tick higher and home sales slow as buyers and sellers wait for lower rates - but that's not stopping home PRICES from shooting higher!
Last week did have 1 very surprising event - the presidential debate. We've all seen the clips and the memes, but what does the outcome mean for interest rates?
After the debate, interest rates moved higher. The average rate on a 30-year fixed rate conventional loan jumped to 6.94% (up from the 6.85% I reported last week).
Last week did have 1 very surprising event - the presidential debate. We've all seen the clips and the memes, but what does the outcome mean for interest rates?
After the debate, interest rates moved higher. The average rate on a 30-year fixed rate conventional loan jumped to 6.94% (up from the 6.85% I reported last week).
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Is a Trump presidency bad for interest rates?
To be clear, this is NOT a political newsletter, but politics can have a HUGE effect on interest rates. The debate caused a dramatic shift in the political conversation as policies take a backseat and many now wonder "is Biden too old to be president?". Opinion articles from many newspaper outlets, like NY Times and Washington Post, are calling for Biden to step down, but as of now, it appears Biden will remain the Democratic nominee.
Many financial experts and bond traders are looking at the current political landscape and are issuing calls to factor a Trump victory this November. Politics aside - what does that mean for interest rates today?
It means that interest rates may trend temporarily higher, at least in the short term. Interest rates after the debate increased because a Trump presidency is predicted to bring changes to tariff, immigration and spending policies that may slow growth to a point where more rate cuts are needed sooner -- good for homebuyers. However, the predicted long term outcome is causing rates to shoot up in the short term.
We saw this same thing in 2015 after Trump was elected. Between election day and inauguration day, mortgage rates ticked up about 0.25% to a peak of 4.37% before falling to 3.6% by July (the good old days of low rates!). So, while a Trump presidency may lower rates, the news of a Trump presidency has rates slightly elevated. Will history repeat itself?
Pending Home Sales Fall To Record Low
Homes under contract to be sold fell to the lowest point ever recorded. Not surprising considering mortgage rates and home prices refuse to come down. The average rate for a 30-year fixed rate conventional loan has been around or above 6.5% since September 2022 and since that time home prices just keep going up! In fact, nationwide home prices hit a record just last week of $419,300. It's no wonder that home sales are slowing, but it's evident that those who have been able to make it work are reaping the benefits of appreciation!
New Construction Home Sales Also Slow
Builders aren't immune to high mortgage rates either. In fact, because builders are often using high interest rate financing to build their projects, they are actually more prone to getting hurt by slower sales. Which is why when home sales fall 11.3% month over month, builders are more incentivized to give high price discounts to try to get sales moving - which is why we saw the median house selling for $417,400, down from $433,000 a month ago.
Homebuyers are LOVING the Fed's Favorite Inflation Index
The personal consumption expenditures price index had positive news for homebuyers. The core personal consumption expenditures price index increased just a seasonally adjusted 0.1% for the month and was up 2.6% from a year ago. Both figures were in line with expectations and these are the LOWEST reported figures since March 2021. The less surprises the better when it comes to inflation reporting as we continue our march towards the Fed's 2% goal.
“It is just additional news that monetary policy is working, inflation is gradually cooling,” San Francisco Fed President Mary Daly told CNBC’s Andrew Ross Sorkin during a “Squawk Box” interview.
RATE CUT WATCH:
Atlanta Fed president and CEO Raphael Bostic published an essay this week in which he said "Taking all the circumstances into account, I continue to believe conditions will likely call for a cut in the federal funds rate in the fourth quarter of this year."
Odds on a September rate cut are still at 61% chance, but if Raphael Bostic is correct, we won't see a rate cut until November 7th (2 days after the 2024 election!)
Employment numbers out this week! Let's hope that the cool numbers can continue during these Summer heat waves!
Is a Trump presidency bad for interest rates?
To be clear, this is NOT a political newsletter, but politics can have a HUGE effect on interest rates. The debate caused a dramatic shift in the political conversation as policies take a backseat and many now wonder "is Biden too old to be president?". Opinion articles from many newspaper outlets, like NY Times and Washington Post, are calling for Biden to step down, but as of now, it appears Biden will remain the Democratic nominee.
Many financial experts and bond traders are looking at the current political landscape and are issuing calls to factor a Trump victory this November. Politics aside - what does that mean for interest rates today?
It means that interest rates may trend temporarily higher, at least in the short term. Interest rates after the debate increased because a Trump presidency is predicted to bring changes to tariff, immigration and spending policies that may slow growth to a point where more rate cuts are needed sooner -- good for homebuyers. However, the predicted long term outcome is causing rates to shoot up in the short term.
We saw this same thing in 2015 after Trump was elected. Between election day and inauguration day, mortgage rates ticked up about 0.25% to a peak of 4.37% before falling to 3.6% by July (the good old days of low rates!). So, while a Trump presidency may lower rates, the news of a Trump presidency has rates slightly elevated. Will history repeat itself?
Pending Home Sales Fall To Record Low
Homes under contract to be sold fell to the lowest point ever recorded. Not surprising considering mortgage rates and home prices refuse to come down. The average rate for a 30-year fixed rate conventional loan has been around or above 6.5% since September 2022 and since that time home prices just keep going up! In fact, nationwide home prices hit a record just last week of $419,300. It's no wonder that home sales are slowing, but it's evident that those who have been able to make it work are reaping the benefits of appreciation!
New Construction Home Sales Also Slow
Builders aren't immune to high mortgage rates either. In fact, because builders are often using high interest rate financing to build their projects, they are actually more prone to getting hurt by slower sales. Which is why when home sales fall 11.3% month over month, builders are more incentivized to give high price discounts to try to get sales moving - which is why we saw the median house selling for $417,400, down from $433,000 a month ago.
Homebuyers are LOVING the Fed's Favorite Inflation Index
The personal consumption expenditures price index had positive news for homebuyers. The core personal consumption expenditures price index increased just a seasonally adjusted 0.1% for the month and was up 2.6% from a year ago. Both figures were in line with expectations and these are the LOWEST reported figures since March 2021. The less surprises the better when it comes to inflation reporting as we continue our march towards the Fed's 2% goal.
“It is just additional news that monetary policy is working, inflation is gradually cooling,” San Francisco Fed President Mary Daly told CNBC’s Andrew Ross Sorkin during a “Squawk Box” interview.
RATE CUT WATCH:
Atlanta Fed president and CEO Raphael Bostic published an essay this week in which he said "Taking all the circumstances into account, I continue to believe conditions will likely call for a cut in the federal funds rate in the fourth quarter of this year."
Odds on a September rate cut are still at 61% chance, but if Raphael Bostic is correct, we won't see a rate cut until November 7th (2 days after the 2024 election!)
Employment numbers out this week! Let's hope that the cool numbers can continue during these Summer heat waves!
Key reporting dates this week:
Mon, 7/1: Construction spending, ISM Manufacturing
Tues, 7/2: Powell Speech, Job openings
Wed, 7/3: ADP employments, Initial jobless claims, Factory orders, US trade deficit, Minutes of Fed's June FOMC meeting
Thurs, 7/4: 🗽HAPPY 4TH of JULY ! 🗽
Fri, 7/5: U.S. employment report
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About the Author:
Eric Bernstein is the President and Co-Founder of LendFriend Mortgage, where he helps homebuyers make smarter, more confident decisions in today’s fast-moving housing market. With over a decade of experience guiding hundreds of clients—from first-time buyers to seasoned investors—Eric brings a mix of market insight, strategy, and personalized service to every mortgage transaction. Each week, Eric breaks down the housing and economic headlines that matter, giving readers a clear, no-fluff view of what’s happening and how it might impact their buying power.