On Trump's victory, housing stocks decline due to increased mortgage rates.

• According to Mortgage News Daily, the average rate on a 30-year fixed mortgage increased by 9 basis points on Wednesday, reaching 7.13%.
• Building material companies and big public builders experienced a significant decline in their housing stocks.
• On Wednesday, D.R. Horton, PulteGroup, Home Depot, and Lowe's were all down.

The rise in the U.S. 10-year Treasury yield, following President-elect Donald Trump's victory, has caused mortgage rates to climb as well.

On Wednesday, the average rate on a 30-year fixed mortgage increased by 9 basis points to 7.13%, according to Mortgage News Daily. This is the highest rate since July 1 of this year, although it did not meet the expectations of some.

Bond traders anticipated that rates would increase if Trump won the election, with a red sweep being the expectation. Although the outcome is still uncertain, the expectation of higher rates is enough to cause another increase in rates that have already risen sharply with Trump's victory odds, according to Matthew Graham, chief operating officer at Mortgage News Daily.

Both the big public builders and building material companies fell sharply, with housing stocks reacting in turn. Retailers also experienced a decline, with approximately 3% drop in midday trading Wednesday.

John Burns, CEO of John Burns Real Estate Consulting, stated that builder stocks are highly sensitive to mortgage rates and mortgage rate expectations. With inflation expectations being higher now, this impacts long-term rates.

Trump discussed deregulation and opening federal land for increased home construction, but did not present a comprehensive housing plan.

The National Association of Home Builders congratulated the president-elect and expressed its anticipation of collaborating with the incoming Trump administration and Congress to pass a pro-housing legislative and regulatory agenda that increases the nation's housing supply and alleviates its affordability issues.

Builders have been purchasing lower mortgage rates for their clients, resulting in a reduction in their profits.

Although mortgage rates hit a recent low of 6.11% on September 11, they have been steadily rising since, despite the recent rate cut by the Federal Reserve. Despite not following the Fed, mortgage rates react to the Fed's thinking on the economy. Stronger-than-expected economic reports in September and October caused bond yields and consequently mortgage rates to move higher.

A homebuyer who bought a $400,000 home with a 20% down payment on a 30-year fixed mortgage in early September had a monthly payment of $1,941. Now, that payment is $2,157, which is $216 more.

The National Association of Realtors reported a 7% increase in pending sales of existing homes in September compared to August. However, this surge occurred before interest rates significantly increased.

The increase in sales can be attributed to an increase in supply. In October 2023, there was a 29.2% increase in the number of homes actively for sale compared to the same month in 2023. This was the highest level of active inventory since December 2019, according to Realtor.com.

Graham stated that the future course of action is uncertain and will depend on factors such as inflation, the economy, and Treasury issuance.