Housing Market Under Trump: What to Expect Next in Real Estate

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Dwellings Digest: In-Depth - How Trump's Housing Policies Could Reshape Real Estate: What Buyers, Sellers, and Investors Need to Know

With Donald Trump back in the White House, real estate professionals are on alert: What could his administration’s policies mean for the housing market? From immigration impacts on rental prices to bold moves on federal land use, early proposals are stirring curiosity—and a fair bit of uncertainty. Will deregulation spark new construction? Can mortgage rates really come down? And, most importantly, how will these shifts impact your next move? Dive into the potential effects as we explore the promises, the policies, and the possibilities that could transform real estate as we know it.

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🏛️ Real Estate Insights Amid a New Administration: Trump’s Housing Policy and Potential Market Impacts

With Donald Trump confirmed as the 47th president and Republicans reclaiming the Senate, the 2024 election outcome has set the stage for shifts that may ripple across the housing market. While specifics of Trump’s agenda are still unfolding, early policy indications provide clues for real estate professionals preparing for potential impacts on housing affordability, supply, mortgage rates, and market dynamics. Here’s what to watch:

Immigration Policy and Housing Demand: Will Deportations Ease Affordability?

Trump’s immigration stance, particularly the plan for mass deportations, is intended to free up housing supply by reducing demand from immigrant renters. However, real estate economists caution against a simplistic link between immigration and housing costs. While a decrease in demand could modestly reduce rental prices in certain areas, the labor market consequences are complex. Over 30% of construction workers are immigrants, and a reduced workforce could drive up costs, slow new builds, and deepen the housing shortage.

• Short-Term Impact: Renters may see minimal price relief in select areas with high immigrant populations.

• Long-Term Impact: A constrained labor force could slow construction, worsening the already significant housing supply gap and pushing home prices higher.

• Takeaway: For real estate investors and professionals, tracking shifts in immigration policy will be essential, as they could tighten housing supply and labor costs, particularly in fast-growing regions dependent on immigrant labor.

Deregulation and Federal Land Access: A Path to Affordable Housing?

Trump’s administration has signaled a strong deregulatory stance, promising to slash building regulations and open federal lands for affordable housing developments. Deregulation could reduce some costs for developers, but experts warn the effects may be limited. According to the National Association of Home Builders, regulatory fees only account for around 7-8% of new home costs, so reducing them may not lead to the dramatic price drops Trump predicts. Meanwhile, the plan to develop federal land holds promise but may be constrained by the location of public lands, largely situated in western states rather than high-demand urban areas.

• Regulatory Cuts: While builders may benefit from fewer regulations, economists agree this alone won’t solve affordability challenges. Lower regulatory costs may marginally improve affordability but won’t address the supply-demand gap.

• Federal Land Access: If federal land near growing cities is opened, new affordable housing projects could follow. However, much of this land is in rural areas where demand is lower.

• Takeaway: Developers in urban and suburban markets could benefit from relaxed regulations, while investors should monitor land policy changes for potential growth opportunities in emerging or adjacent regions.

Mortgage Rates and Federal Reserve Influence: Navigating Rate Volatility

Trump’s pledge to bring mortgage rates down aligns with his administration’s economic goals but faces practical challenges, as the president has limited direct control over interest rates. Mortgage rates are heavily influenced by the Federal Reserve’s monetary policy and, more directly, by the bond market. A Republican-led Congress may pursue deficit-expanding policies, raising inflation fears and pushing Treasury yields up, which mortgage rates follow. Currently, rates are hovering around 6.79%, and some experts anticipate more volatility as markets react to new fiscal policies.

• Interest Rate Drivers: Rising Treasury yields reflect investor concerns over inflation, expected to continue under expansive government spending.

• Homebuyer Impact: Higher mortgage rates directly impact affordability, limiting purchasing power for many buyers and likely slowing transaction volumes.

• Takeaway: Real estate professionals should prepare clients for continued rate fluctuations and advise buyers and sellers on potential timing strategies to mitigate the effects of rising rates on affordability.

Supply Constraints and Potential Market Reactions: Navigating Inventory and Demand

Trump’s policies underscore the demand to address housing supply constraints that have intensified over the last decade. However, while regulatory reductions and federal land development may help, they won’t entirely resolve the issues of undersupply. Nationwide, a shortage of 2.5 to 7.2 million homes has persisted due to low construction following the Great Recession and local zoning restrictions, especially in high-demand urban areas. Experts caution that quick fixes aren’t likely, but strategic planning, efficient development, and supportive policies could ease constraints over time.

• Buyer-Seller Dynamics: Higher inventory could offer more choices for buyers but may be tempered by high rates, which dissuade new purchases. Sellers may need to adjust pricing or offer concessions in areas with rising listings.

• Market Cycles: Watch for potential cyclical slowdowns as the market adjusts to new inventory, mortgage rate changes, and buyer hesitancy.

• Takeaway: Real estate professionals should advise clients on current market cycles, inventory trends, and potential price adjustments as inventory grows and demand fluctuates.

Looking Ahead: How Real Estate Professionals Can Prepare

With a new administration in place, real estate professionals can expect shifts in housing policies that may open opportunities but also introduce challenges. Here are practical steps to take:

1. Stay Informed on Policy Changes: Closely monitor regulatory updates, federal land development plans, and economic signals, especially around interest rates, to gauge timing and strategy for buyers and sellers.

2. Educate Clients: Keep clients informed about how federal changes may affect mortgage rates, supply, and affordability. Empower them to make informed choices by offering insights on timing, financing options, and market adjustments.

3. Adapt to Shifting Market Dynamics: Consider portfolio diversification, and be open to new opportunities in emerging areas that may benefit from policy-driven developments.

Final Thought

Navigating a dynamic real estate market under new leadership requires a strategic, data-driven approach. While proposed changes may offer benefits to some, the longstanding structural issues in housing require more than temporary fixes. Real estate professionals should focus on helping clients make informed, strategic decisions that align with both immediate needs and long-term goals.

And…that's a wrap on this edition!