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There is an Election-Related Slowdown in Home Sales, but the Net Effect Will Likely be Lower Mortgage Rates

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Saturday November 7, 2020
There is an Election-Related Slowdown in Home Sales, but the Net Effect Will Likely be Lower Mortgage Rates

Regardless of who you voted for, elections have an impact on a myriad of markets in the United States. You’ve likely noted the instability in the stock market and wondered if you shouldn’t have bought gold sooner. The election also impacts the housing market.
The reality is that there has been a slowdown in housing sales, and many experts believe this is directly attributable to the uncertainty of the election. As we have noted previously, the majority of recent home purchases are being made by individuals with more stable assets, the type of people who have a sizeable amount of money in the stock market. Given that the stock market is behaving erratically, it is no surprise that these buyers are proceeding with a little more caution.
Wealthier individuals are very sensitive to market shifts, as a single percentage point up or down can represent tens-of-thousands of dollars. Buyers aren’t the only people treading carefully during this election, sellers are proceeding with caution. The week ending on October 24, 2020 saw a 38% drop in home sales.
Ultimately, this slowdown may have the net effect of driving mortgage rates lower; this will likely jumpstart housing sales. When the stock market behaves erratically, investors tend to move their money into bonds and mortgage-backed securities. Mortgages typically fall when there is a surge in bonds and mortgage-backed securities. Until a victor is declared, the uncertainty in the stock market will have a trickle-down-effect, ultimately benefitting the housing market.

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