President-elect Donald Trump's victory led to a rise in the 10-year US Treasury yield. Mortgage interest rates, which are loosely based on benchmark yields, are also rising.

According to Mortgage News Daily, the average interest rate on the 30-year fixed-rate mortgage rose 9 basis points to 7.13% on Wednesday. That's the highest rate since July 1 of this year, although not quite the increase some had expected.

“Bond traders expected before the election that interest rates would rise in the event of a Trump victory, and particularly a red victory. While the latter is not yet clear, the former is enough for a further increase in interest rates that have already risen.” “Abruptly with Trump's chances of winning,” said Matthew Graham, chief operating officer at Mortgage News Daily.

Housing stocks then reacted, with both large public property developers and building materials companies collapsing sharply. Lennar, DR Horton And PulteGroup all fell more than 4% in midday trading on Wednesday. Retailer Home Depot And Lowes also fell by more than 3% apiece.

“Construction company stocks are very sensitive to mortgage rates and mortgage rate expectations. Inflation expectations are higher now, impacting long-term interest rates,” said John Burns, CEO of John Burns Real Estate Consulting.

While Trump didn't offer a detailed housing plan, he did talk about deregulation and opening up federal lands to more housing.

The National Association of Home Builders congratulated the president-elect with a statement from its chairman, Carl Harris, saying, “NAHB looks forward to working with the incoming Trump administration and congressional leaders of both parties to pass housing-friendly legislation and regulations . “Agenda that increases the country’s housing supply and alleviates the country’s affordability problems.”

Major home builders have cut mortgage rates for their customers, but this has squeezed their margins.

Mortgage rates hit their recent low of 6.11% on September 11th, but have risen steadily since then, despite the Federal Reserve's recent rate cut. Mortgage rates do not follow the Fed, but rather respond to the central bank's economic considerations. Stronger-than-expected economic reports in September and October led to a rise in bond yields and therefore mortgage rates.

To put it in perspective for consumers, a home buyer purchasing a $400,000 home with a 20% down payment on a 30-year fixed-rate mortgage would have received a monthly payment of $1,941 in early September. Today, that payment would be $2,157, a difference of $216.

Sales of existing homes saw an unusual increase this fall. According to the National Association of Realtors, pending sales, which are signed contracts, increased 7% in September compared to August. That was before interest rates shot up significantly.

The increase in sales is largely due to a larger supply. According to Realtor.com, there were 29.2% more homes actively for sale in October than in October 2023, reaching the highest level of active inventory since December 2019.

“The path forward is unclear and will ultimately be determined by inflation, the economy and government bond issuance,” Graham added.