Mortgage rates have hit their highest point in 2016, with nearly a .5% increase since the election. Despite rates still being “Historically Low” the rise will decrease the amount buyers and their ability to obtain financing in an already pricey housing market.

Experts say that there are two primary reasons for the rate hike:

1. Foreign investors are pulling their money out of the bond market due to a lack of a confidence.
2. American investors are taking their funds out of bonds and reinvesting in stock options for various reasons.

So what is the actual price difference before and after the election? Lets take a look:

Before Election:

• 30 year fixed rate – 3.59%
• San Diego Median Home Price – $495,000
• 20% Down

After Election 

• 30 year fixed rate – 4.02%
• San Diego Median Home Price – $495,000
• 20% Down
• Monthly increase compared to before election : approx $97
• Total increase on life of loan to before election: approx $35,000

The good, the bad and the ugly

Good – Rising rates could slow down home sales, and ability for competing buyers to obtain financing, thus slowing down the hot seller’s market and making sellers “less bullish” on their listing prices.

Bad – President Trump stated he is planning to implement an “infrastructure first” policy that would essentially focus funding on transportation, telecommunications, electricity and clean water before focusing on other items. Not necessarily a “bad thing” in general regards, but with spending like this will create higher inflation which could cause the Federal Reserve to raise short term rates to counter inflation.

Ugly – Nobody really knows what is & will happen once Trump takes office. Everything is all speculation at this point and the markets are reacting as such. Speculation as to whether there will be tax cuts, extra spending on law enforcement / resources to deport undocumented immigrants, reformation of 2010 Dodd-Frank Act, Trade war with Mexico/ Canada/ China and more.

So what is next?

If you are a buyer, it is time to spring to action and take advantage of rates while they are still historically low. There is no way to tell if rates will continue to rise after Trump is in office or decrease if investors gain confidence. In the 80’s, a 30- year fixed rate was in the 18% range and 2016 started off at 3.79%. So it is still a really great time to use financing while buyer competition could start to decrease as rates go up.

If you are a seller, it is also time to spring to action and take advantage of the larger buyer pool before rates could get high enough to make a difference in both the amount of buyers/ offers and increase of market value

** References for this Blog post**

The San Diego Union Tribune. (2016, November 16). Mortgage rates up in SoCal following Trump Victory [Website Article]. Retrieved from http://www.sandiegouniontribune.com/business/real-estate/sd-fi-mortgage-rates-20161115-htmlstory.html