Non-Warrantable Condo Financing; 3 Reasons We’ll See Lower Rates After Election

Rates are almost 1% higher than where they were in September.

X is lit up with comments about how this is proof that the Fed has lost control of long-term rates and its credibility.

But, analysts like George Gammon are quick to point out that the Fed never had control or credibility. 😊

I wrote this blog a few weeks ago: Two Reasons Why Rates Will Shoot Higher After the Election – reminding readers that rates went UP the last time Trump was elected because of expectations that spending would increase and/or that the economy would grow faster.

I suspect we are seeing the same effect this time before the election because the betting markets believe Trump will win with more certainty than before.

We will get a slew of market-moving economic reports this week, and the cynic in me expects them to be mostly positive given that the election is next Tuesday.

So Here Are Three Reasons We Could See Lower Rates After the Election:

1. The October effect will be over. I blogged about this recently, reminding readers that rates peak almost every October before dropping (they hit 8% in October of ’23 before dropping to 6.6% in December).
2. The Trump-victory anticipation trade will be over – whether Trump or Harris wins. Similar to how the markets anticipate Fed cuts, the markets are now pre-empting a Trump victory. So, the reaction if there is an actual victory will be muted. In 2016, the reaction was AFTER the Trump victory because nobody expected it.
3. More accurate data will surface. This is the cynic perspective I see on X. But some analysts believe that more accurate (and negative) economic data will start to surface after the election, as the incentive to bias it will be less and the actual data can’t be suppressed forever.

Non-warrantable Condo Financing

As a quick reminder, a non-warrantable condo is a unit or complex that does not meet Fannie Mae or Freddie Mac guidelines and is thus ineligible for competitive financing. Issues can include owner-occupancy ratios, inadequate reserves, litigation against the HOA, too much commercial space, etc.

Here is a blog worth reviewing: 14 Condo Considerations.

We have investors willing to finance non-warrantable condos, and all they require is 25% down and adequate insurance. The interest rates are about 2% or more higher too.

So, if I were an agent, I would play “would you rather…”

Buy a $700,000 non-warrantable condo with a 9% rate? (Mortgage payment with 25% down = $4,193)

Or

Buy an $850,000 warrantable condo with a 7% rate? (Mortgage payment with 25% down = $4,216)

My point is that agents and buyers often come to us with condos that are “great deals,” expecting to get low Fannie Mae interest rates.

But, the reason those condos are often such “great deals” is because they are non-warrantable.

Hence, buyers and agents alike should expect to put down at least 25% for those “great deals” and they should expect 2% higher rates.