What Lies Ahead for the Local Real Estate Market in a Trump Presidency?
Whether you love him, hate him, or you’re just tired of hearing about him, President Donald Trump certainly is trying to change our country. But what will his presidency mean for buying or selling a home in our market? No one really knows what President Trump will do or accomplish in the long-term, but he’s said enough that we can make some assumptions about the future. Here’s a perspective on what might lie ahead.
Before we look forward, here’s a snapshot of the current state of our housing market: Overall, the market experienced modest growth in both units and volume, so 2016 was generally a good year, and we’re off to a great start in the first half of 2017.
President Trump has had a very favorable effect on the economy, not by anything he has done; but more by what people believe that he is going to do. Many believe his actions will cause the economy to grow faster, as evidenced by gains we’ve seen in the stock market. These gains, along with rising house values, have led to the highest cumulative net worth of American citizens on record.
President Trump has stated that reducing regulations will be high on his agenda. Deregulation can impact real estate in many ways. In general, however, fewer government regulations would mean positive changes for the real estate market.
One of the biggest issues currently facing the market is limited housing inventory for buyers to purchase. We’ve had a lack of necessary new construction in many geographic areas because developers’ costs have been higher, most often due to regulations and government approvals. Increased regulations in the lending industry have translated in more challenges for developers and builders seeking construction financing.
Trump’s promises to reduce regulation, as well as renegotiate trade deals that affect the construction industry, should reduce some of the factors preventing more new homes from being built. In turn, this would have a very positive effect on the housing market.
In addition to deregulation and trade deals, the new administration’s agenda has other implications for the real estate market. Mortgage and interest rates have a big impact on the housing market. Rates have risen from the historic lows we experienced recently, but they remain very affordable. Reducing the amount of regulation in the mortgage market can help keep mortgage costs low.
During the campaign, President Trump said he did not believe the federal government should be in the mortgage business. If he removes the federal government from guaranteeing mortgages as it does with Fannie Mae, it would severely affect the market in a negative way. Most recently however, the Trump administration has been more ambiguous about its position on government involvement. Lately, representatives have been indicating that the government should guarantee mortgages in some way, which is good news for homeowners and mortgage investors.
Probably the biggest risk for the economy and the real estate market is general fear that the President will not be able to deliver on his agenda. Right now, the rise in the stock market and economic optimism are based on assumptions that the Trump administration will reduce corporate tax rates and dramatically reduce regulations.
Reductions in regulations are more controllable, since much can be done by Executive Orders, but tax reform will require approval by Congress, which could prove more challenging. It’s probable that if progress is not made on tax reform, we’ll see a large pull back in the stock market. Such a drop might be labeled by the media as a failed economy, which could push us into a recession. This, of course, is very negative for the real estate market.
In short, if the President can make his campaign promises a reality, it would have a positive effect on the real estate market for the next few years. However, if we remain status quo, it could cause the economy and the housing market to stagnate. Whether you love him or hate him, if President Trump’s economic agenda is approved, it could help those looking to buy or sell a home in the near future.