The conventional wisdom just a few weeks ago foresaw a solid electoral win for former Secretary of State Hillary Clinton and a smooth passing of the baton from the Obama administration, along with a gentle increase in interest rates in December by the Federal Reserve. No more.
Last week in Orlando, Fla., just before most voters went to the polls, Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, said only “election turmoil” could force the Fed to in December.
“You can never rule things out post-election,” Lockhart said. “We may end up with enough turmoil around the election to create a different set of conditions,” he said during a news conference at the National Association of Realtors annual convention.
Indeed, fears of recession could grow with a likelihood that Trump would cut government spending dramatically in his first year, and stock-market uncertainty increasing over just how his presidency will begin. As such, another year of low interest rates could be in the cards.
“I don’t believe that there will be any significant changes to interest rates, at least in the near term, since the underlying fundamentals that have led us into a low-interest-rate environment haven’t changed,” said Rick Sharga, executive vice president of Ten-X, formerly Auction.com, a real-estate auction site.
Sharga sees a Trump presidency being good for the housing and mortgage markets in the long term, he said. “He seems committed to bringing regulatory relief — and regulatory certainty — to the financial-services industry, which should make more credit more available to average home buyers who have been locked out of the market by today’s extraordinarily tight credit standards,” he said.
As a result, home buying should remain strong in 2017, which is good news for a market starved of inventory. “This is absolutely a seller’s market and has been for quite some time, and we do not feel Donald Trump’s win will negatively affect the market for those looking to sell,” said Nancy Dennis, a vice president at American Financing Corp., an Aurora, Colo.–based mortgage lender.
Down the road, interest rates could begin rising faster, especially if Trump’s economic-growth plans ignite inflation. “The accelerated economic growth and ensuing inflationary pressure could prompt a quicker pace of rate hikes that are potentially more aggressive than exhibited over the past year,” wrote John Chang, first vice president of research services at Marcus & Millichap MMI,-0.74% , the largest U.S. real-estate brokerage firm, in a note to investors this week.
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