30 year mortgage rates in the United States are the lowest they've been since April 2023, at 6.2%. But demand for new mortgages isn't budging. Here is the chart:
You can see immediately what the problem is from the above graph.
During the pandemic, when the Fed made emergency cuts to interest rates, millions refinanced their mortgages, locking in rates of about 2.6% to 3% for 30 years. These people are sitting pretty. It makes no sense for them to move house, given that would involve a new mortgage at 6.2%.
The only people taking out new mortgages are first-time buyers, and those forced to relocate due to their job. Not everyone relocates as working from home is now a thing. Those who have to relocate, rent out their existing property, and use that rental income to pay rent at their new location.
Interest rates will likely never get back to their pandemic levels - the ultra-low interest rate environment was an anomaly not seen in the last 300 years.. Which means both the real estate and construction industries, and the banking sector, have a very sluggish outlook for the next 25 years.
Given that construction and banking are big parts of the economy, future growth looks sluggish. This holds no matter who becomes President.
So, does this mean more banking failures?
Hopefully banks will pivot to business lending and make their profits from that.