US election doesn't curb mortgage activity – or does it?

Mortgage rates increasing to 7% for the first time since early July, coupled with economic uncertainty, and the incoming presidential election appear – at first glance at least – to have not caused prospective homebuyers and sellers to hit pause, according to Redfin.

For buyers, pending US home sales increased by 4.5% year over year during the four weeks ending October 27, the biggest increase in over three years. On the selling side, new home-for-sale listings rose 3.4%, which is in line with the increases seen over the last several months.

However, those numbers – reporting on a four-week period – don’t necessarily tell the whole story, Redfin suggests. It notes that comparisons are being made to October 2024 when rates hit a two-decade high of 7.79%.

In reality, Redfin agents report that buyers and sellers are waiting until after the election, which aligns with its survey that revealed nearly one-quarter of prospective first-time buyers are holding off to see what Harris or Trump do next.

However, home sales and listings are still holding up. The typical US homebuyer's monthly mortgage payment is up to $2,593, brought on by rising mortgage rates and high home prices. Chen Zhao, Redfin's economic research lead, said she expects a bigger drop-off in home buying and selling activity because of the jump in mortgage rates.

“While it’s not unusual for mortgage rates to rise heading into an election as investors’ expectations change, mortgage rates surging to 7% after the Fed’s interest-rate cut is surprising, as is the fact that pending sales have remained resilient,” Zhao said.

“There was a possibility that mortgage rates would rise after the September rate cut, but we didn’t expect them to rise this much. There was a window of 6% mortgage rates early this fall, but that window was shorter than expected. It’s possible 7% rates will also have a short window; rates could decline depending on the outcome of the election, if the worries driving bond-market investors to demand higher rates dissipate.”