Editors' pick: Originally published Nov. 11.
Interest rates should increase gradually during the next four years under a Donald Trump administration, which could dampen growth in the housing industry, economists and housing experts predict.
The 10-year Treasury rose over the 2% threshold on Wednesday for the first time in several months, driving mortgage rates higher with the 30-year conventional rate rising to 3.73% according to Bankrate.com. Mortgage pricing is tied to the 10-year Treasury.
Housing demand will remain flat with a rise in interest rates as many first-time homebuyers will be saddled with more debt, said Peter Nigro, a finance professor at Bryant University in Smithfield, R.I.
"With first-time homebuyers more in debt due to student loans, I don't expect much growth in home purchasing," he said.
Interest rates will also be affected by the size of the fiscal stimulus since additional infrastructure spending and associated debt "could push interest rates up through the issuance of more government debt," Nigro said.
Even if interest rates spike in the next year, banks will not benefit, because there is a lack of demand, said Peter Borish, chief strategist with Quad Group, a New York-based financial firm. The economy is slowing down, and consumers have already borrowed money at very "cheap" interest rates, he said.
The policies set forth by a Trump administration will lead to contractionary results and will not spur additional growth in the housing market.
"I prefer to listen to the markets," Borish said. "This will put downward pressure on the prices in the market. Everyone complained about Dodd-Frank, but why is JPMorgan Chase's stock at all time highs?"