Mortgage Rates vs. Presidential Inaugurations: Is There a Correlation?

January 12, 2017 No Comments »
Mortgage Rates vs. Presidential Inaugurations: Is There a Correlation?

Let’s get political – just kidding. Let’s talk about data that involves presidential elections and mortgage rates, more specifically, what happens to rates during an election year and the subsequent year to find out if there are any trends that pop out.

I went ahead and scoured Freddie Mac’s 30-year fixed-rate mortgage data, which dates back to April 1971 and lined it up with every presidential election since then.

Three pieces of data were plucked from their database:

– Mortgage rates at the time of the election
– Mortgage rates a month after the inauguration
– Mortgage rates at inauguration year-end

November 6th, 2012 Obama incumbent win (Democrat)

The 30-year fixed averaged 3.35% during the month of November 2012. It averaged a HIGHER 3.53% for the month of February 2013, the month after Obama’s inauguration.

It ended the year 2013 HIGHER at 4.48%.

November 4, 2008 Obama win (Democrat)

The 30-year fixed averaged 6.09% during the month of November 2008. It averaged a LOWER 5.13% for the month of February 2009, the month after Obama’s inauguration.

It ended the year 2009 LOWER at 4.93%.

November 2, 2004 Bush Jr. incumbent win (Republican)

The 30-year fixed averaged 5.73% during the month of November 2004. It averaged a LOWER 5.63% for the month of February 2005, the month after Bush’s inauguration.

It ended the year 2005 HIGHER at 6.27%.

November 7, 2000 Bush Jr. win (Republican)

The 30-year fixed averaged 7.75% during the month of November 2000. It averaged a LOWER 7.05% for the month of February 2001, the month after Bush’s inauguration.

It ended the year 2001 LOWER at 7.07%.

November 5, 1996 Clinton incumbent win (Democrat)

The 30-year fixed averaged 7.62% during the month of November 1996. It averaged a HIGHER 7.65% for the month of February 1997, the month after Clinton’s inauguration.

It ended the year 1997 LOWER at 7.10%.

November 5, 1992 Clinton win (Democrat)

The 30-year fixed averaged 8.31% during the month of November 1992. It averaged a LOWER 7.68% for the month of February 1993, the month after Clinton’s inauguration.

It ended the year 1993 LOWER at 7.17%.

November 8, 1988 Bush Sr. win (Republican)

The 30-year fixed averaged 10.27% during the month of November 1988. It averaged a HIGHER 10.65% for the month of February 1989, the month after Bush’s inauguration.

It ended the year 1989 LOWER at 9.74%.

November 6, 1984 Reagan incumbent win (Republican)

The 30-year fixed averaged 13.64% during the month of November 1984. It averaged a LOWER 12.92% for the month of February 1985, the month after Reagan’s inauguration.

It ended the year 1985 LOWER at 11.26%.

November 4, 1980 Reagan win (Republican)

The 30-year fixed averaged 14.21% during the month of November 1980. It averaged a HIGHER 15.13% for the month of February 1981, the month after Reagan’s inauguration.

It ended the year 1981 HIGHER at 16.95%.

November 2, 1976 Carter win (Democrat)

The 30-year fixed averaged 8.81% during the month of November 1976. It averaged a LOWER 8.67% for the month of February 1977, the month after Carter’s inauguration.

It ended the year 1977 HIGHER at 8.96%.

November 7, 1972 Nixon incumbent win (Republican)

The 30-year fixed averaged 7.43% during the month of November 1972. It averaged a HIGHER 7.44% for the month of February 1973, the month after Nixon’s inauguration.

It ended the year 1973 HIGHER at 8.54%.

Did We Find Any Trends?

So let’s tally up the numbers here. The Freddie Mac data stretches back to 1972, allowing us to cover 11 presidential elections.

There were six Republican wins and five Democratic wins during that time.

Republican terms were split 3/3 in favor of lower vs. higher rates at inauguration year-end.
Democratic terms were split 3/2 in favor of lower vs. higher rates at inauguration year-end.

In six out of the 11 inauguration years, mortgage rates ended up LOWER at the end of year compared to November of the previous year.

That meant the five remaining years did the opposite. The same held true of rates in November (election) versus the following February (inauguration). So LOWER barely edged out HIGHER overall.

But if we remove the elections from 1972-1980, the balance shifts to 6 to 2 in favor of LOWER rates.

If we throw out the four incumbent wins since 1984, it moves to 4 to 0 in favor of LOWER rates.

If we throw out all incumbent wins since 1972, we have a ratio of 4 to 2 in favor of LOWER rates.

When Donald J. Trump won the election last November, the 30-year fixed averaged 3.77%. It has since shot up to 4.12% in rather volatile fashion (it was as high as 4.32% in December).

The last inauguration year that mortgage rates ended higher with a newcomer president (a president-elect) was in 1981. Does this mean mortgage rates could end 2017 lower with President Trump in office?

The data isn’t definitive, but if they don’t go down, it would be the first time in nearly 40 years.

(photo: DVIDSHUB)

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