Housing Market Stays Surprisingly Active as Election Looms and Mortgage Rates Hit 7%

Mortgage rates rose to 7% for the first time since early July this week, erasing their late-summer decline into the low-6% range. That’s according to a new report from Redfin, the technology-powered real estate brokerage. Rising rates, combined with economic uncertainty and anxiety brought on by the impending presidential election, are causing some prospective homebuyers and sellers to press pause. But the effect is smaller than expected.

On the buying side, pending U.S. home sales rose 4.5% year over year during the four weeks ending October 27, the biggest increase in more than three years. On the selling side, new listings of homes for sale rose 3.4%, in line with the increases we’ve seen over the last several months.

“October has been a busy month overall, but this week election anxiety is kicking in,” says Heather Mahmood-Corley, a Redfin Premier agent in Phoenix. “Some buyers and sellers have backed off, saying they’re waiting to see what happens with the election before they make a move. But mortgage rates aren’t stopping anyone; buyers are used to high rates.”

But those numbers don’t tell the whole story

First, they measure a four-week period ending just before mortgage rates hit 7%; some people may see 7% as the threshold beyond which they won’t buy or sell. Second, we’re comparing to a period in October 2023 when weekly average mortgage rates hit a two-decade high of 7.79%, dramatically slowing housing-market activity. Finally, there are signs that house hunters are backing off at earlier stages of the homebuying journey. Mortgage-purchase applications are down 8% from a month ago. And Redfin agents report that many buyers and sellers are sitting on the sidelines until after the election, aligning with a recent Redfin survey finding that nearly one-quarter of prospective first-time buyers are holding off until post-election.

“The last week or so has been quieter than usual because we’re getting so close to the election, and people are wary about making a huge purchase just before a major event. New buyers aren’t jumping into their house hunt this week, and sellers probably aren’t going to choose the Friday before a presidential election to list their home. But buyers and sellers who are already under contract are moving forward, and I expect activity to pick up again in a few weeks.” – Nicole Stewart, Redfin Premier agent in Boise, ID

“Buyers are more cautious; they know they have some time to wait on the sidelines because listings are sitting on the market longer than usual. The election is playing a larger role in the slowdown than I’ve seen in the past. I think it’s partly because of the overwhelming stress of this election, and partly because the country feels more divided than ever before, and nobody knows what impact the election will have on the economy or interest rates.” – Blakely Minton, Redfin Premier agent in Philadelphia

Even with those caveats, pending home sales and listings are holding up surprisingly well

Rising mortgage rates, combined with stubbornly high home prices, have brought the typical U.S. homebuyer’s monthly mortgage payment to $2,593, near its highest level since July, and cut into buyers’ purchasing power. Redfin Economic Research Lead Chen Zhao said she would expect a bigger dropoff in home buying and selling activity with the jump in mortgage rates, especially given that the country is a week away from a highly consequential and uncertain presidential election.

“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.”