Mortgage rates have been a thorn in the side of the U.S. economy for several years, and they've also been a bugaboo for President Trump.
After a housing boom during the pandemic, mortgage rates soared in the inflationary period that started in 2022, and remain elevated today, though they have eased down from their peak. As a result, the housing market has been as weak as it's been in a generation, and President Trump sees elevated interest rates and mortgage rates as a pain point for both the economy and his administration.
He's pressured the Federal Reserve to lower interest rates, and he's now taking a new approach to easing mortgage rates by announcing that Fannie Mae and Freddie Mac would buy $200 billion mortgage bonds. Such a move will raise prices and therefore lower yields on mortgages since rates for new mortgages tend to follow rates for mortgage bonds.
As a result, the 30-year mortgage rate was 6.06% last week, its lowest rate in three years. Let's take a look at two stocks that could benefit from falling mortgage rates.
Image source: Getty Images.
1. D.R. Horton
Homebuilders may have more exposure to the housing market and mortgage rates than any other company. Though they aren't involved in the existing home sales market, the market for new homes is connected, and lower mortgage rates drive demand for both.
NYSE: DHI
Key Data Points
D.R. Horton (DHI 2.11%) is the nation's largest homebuilder, and it tends to focus on lower-priced homes and first-time homebuyers, who are especially sensitive to monthly payments. Lower rates also tend to lift home prices, which will make it easier for Horton to charge more for its homes since a lower rate will reduce the monthly payment for homebuyers.
2. Opendoor Technologies
Opendoor Technologies (OPEN 6.64%) may have more exposure to mortgage rates and home prices than any other publicly traded company.
NASDAQ: OPEN
Key Data Points
The stock has been highly volatile since it went public in 2020 and even soared in a meme stock rally last year. Opendoor makes money through flipping homes and collecting related fees, and falling mortgage rates should give the business a boost as Opendoor does best when home prices are rising.
The company has been reenergized after new CEO Kaz Nejatian took over the company last September, and two of its founders rejoined the board. If Opendoor is able to capitalize on falling rates and possibly rising prices, it should be a winner here.
