When the presidential election is over, one thing is fairly certain: there will be some changes to interest rates, affecting stocks, bonds, and mortgage rates. We know something will happen; we’re just not sure which way things are going to go. Historically, rates generally drop after a Democrat is elected, according to Freddie Mac data. The last couple of years have bucked that trend, but only slightly, with average rates rising from 3.66% in 2012 to 3.85% in 2015.
Politico thinks things are leaning the opposite way: Rates are going to have a big impact on the election. With a “still-uneven economy,” even a small rate hike could “unsettle” the progress we’re making. According to CNN Money, “Raising rates too soon can … rattle the stock markets. It can also crush consumer and business confidence.” With one more Fed meeting scheduled before the election — only six days before — is it possible Janet Yellen will choose to bump up interest rates? It seems highly unlikely.
Elections and candidates often have a negative impact on the economy because candidates need to point out problems in the country so that they can offer ways to fix them.. According to Tim Kane, an economist at the Hoover Institution, this negative talk “creates pressure on the Fed to keep rates low to boost the economy.”
In a more general sense, the impact of the election is one of uncertainty: We don’t know who will win, and therefore we can’t begin to predict economic trends over the next few years. This pushes consumer confidence down and makes more people reluctant to go out on a major spending limb, especially for such a big-ticket item as a new home.
Whatever you decide to do, though — jump in while rates are low, or hold off to see how the economy reacts to the new regime — just remember there is no right or wrong answer. The housing market is constantly in flux, and only you and your real estate advisors can determine what’s best for you. If you’d like to discuss these trends and ideas further, my office door is always open. Contact us for a conversation today.
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