Key developments for the week of November 4th, 2024.

Hello, this is Justin O’Neill from Flyhomes, bringing you a special market update that’s a bit different from the usual. This week, we witnessed two significant events shaping the market: changes from the Federal Reserve and the outcome of the presidential election.

The Fed’s 0.25 Basis Point Cut – What It Really Means

Jerome Powell and the Federal Reserve announced a 0.25 basis point cut to the Fed Funds Rate this week. If you’re wondering why mortgage rates didn’t drop despite this cut, here’s why: the market had already anticipated this move. This means the effects of the rate cut were “baked in” ahead of the announcement, leaving mortgage rates unchanged.

How the Presidential Election Impacted Rates (Briefly)

We also had the presidential election this week, which initially caused rates to spike. Trump’s victory pushed mortgage rates higher on Tuesday and into Wednesday. However, this increase was short-lived, and rates have since dropped back below Tuesday’s levels.

What Does This Mean for Homebuyers?

For bond traders, these rate movements are significant, but for homebuyers, not so much. Here’s a quick snapshot: rates shifted from 7.04% on Tuesday to 7.13% on Wednesday before settling back to 6.98% today. While these small changes may seem important, they’re not enough to impact most home purchases.

The Market’s Outlook: Jobs and Inflation Take Center Stage

Analysts are now speculating that the midweek rise in rates hints at market concerns about Trump’s policies potentially being inflationary. However, this factor takes a backseat to the labor market. In the near term, job market trends are the key to understanding where rates might move, with inflation coming next and executive policies following.

Prioritizing Market Influences:

Labor market
Inflation
Executive branch policies

No Historical Evidence of Election-Driven Rate Swings

It’s important to remember that there is no consistent historical trend of interest rates changing significantly after a presidential election. The largest shift was in 2008, but even then, it was less than one percentage point. Moreover, the historical record shows a 50/50 chance of rates moving up or down post-election. In summary, elections alone don’t create substantial changes in mortgage rates.