Voters Reaction Towards Housing Costs
Voters dissatisfied with rising prices, notably skyrocketing housing expenses, helped re-elect Donald Trump to the presidency. What effects may a second Trump administration have on the real estate market, as well as on first time home buyers and sellers? In the short term, that implies higher mortgage rates. However, analysts suggested that a second Trump administration may also bring greater tax breaks and less regulation overall.
According to Fratantoni, Trump’s ideas may result in greater tax breaks and less regulation, which would benefit builders and homebuyers. However, they may also increase the government debt, which would raise mortgage rates. Mike Fratantoni is the chief economist at the Mortgage Bankers Association.
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How Will Trump’s Presidency Affect Home Buyers And Sellers?
In the upcoming months, keep an eye out for these six important factors.
1. Higher Rates On Mortgages
After the election, anticipate that mortgage rates will continue to be high. Reports state that as of November, the average 30-year mortgage rate is 7.13%.
Fratantoni stated that the 10-year Treasury rate increased by around 20 basis points overnight. Thus, it is reasonable to assume that the rate will rise similarly for mortgages.
Expect the U.S. economy to grow more rapidly under the Trump administration, which will lead to greater inflation and, ultimately, higher interest rates, Fratantoni stated.
According to experts, Trump’s policies may result in higher mortgage rates by the end of this year. However, the persistent problem of the federal deficit, which affects mortgage rates, is one specific source of suffering.
As a result, analysts anticipate that Trump’s silence on the federal deficit will raise interest rates. Even if the Fed is lowering its short-term interest rates, mortgage rates will rise slightly in the near future if the outlook for the budget deficit does not improve.
The Fed won’t lower interest rates further until Trump’s actions cause inflationary pressures to lessen, which will keep mortgage rates high. The president-elect made promises during the campaign to lower mortgage rates to 2%, but the one thing we know for sure about mortgage rates is that Americans won’t be seeing that rate in the near future, according to analysts.
2. Higher Home Prices
Trump’s proposed taxes on imported products might raise the cost of building a home, thus expect higher costs for homes. Trump placed taxes on Canadian lumber going into the United States during his previous presidency. It is according to the National Association of Home Builders. However, these duties have continued throughout the Biden administration. According to the National Association of Home Builders’ 2022 projection, the average price of a newly constructed home has increased by around $14,000.
The cost of labor, the cost of construction materials other than timber, government regulations, and the scarcity and affordability of developable land are some of the other reasons that have increased the cost of building a home.
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3. Additional Tax Perks For Home Builders
Under a Trump administration, expect further tax breaks that might encourage the construction of new homes. Theoretically, additional inventory might result in reduced housing prices. However, analysts expect that these drops might be countered by higher mortgage rates and higher costs associated with buying a home as a result of Trump’s tariffs.
The National Housing Conference’s president and CEO, David Dworkin, expressed optimism that a second Trump administration may bring about housing tax credits. He said that these credits would benefit builders and homebuyers and significantly affect the supply of available homes. Additionally, due in part to a shortage of new houses on the market, housing prices have risen to all-time highs this year.
Dworkin anticipates the emergence of a revised concept known as “opportunity zones.” Congress established opportunity zones in 2017 with Trump’s Tax Cuts and Jobs Act. In return for certain tax advantages, such as postponing capital gains taxes, it permits businesses or individuals to invest in specified low-income areas. Opportunity zones, according to Dworkin, have aided in the creation of inexpensive homes.
4. Reduced Regulation In Homebuilding And Financing
Fratantoni predicted that with Trump in the White House, “both in the lending and the building space, expect a lighter-touch regulatory environment.” In general, that will benefit the loan and housing markets.
Additionally, builders are anticipating Trump’s second term. A key component of President Trump’s economic agenda was housing policy and increased home supply.
According to experts, there have been more regulatory demands during President Biden’s final four years in government. However, President Trump has loosened the rules that should encourage domestic construction. Therefore, it is the best time to buy new homes and invest in real estate.
5. Freddie Mac And Fannie Mae May Go Private
Anticipate further discussions on reintroducing Fannie Mae and Freddie Mac, two government-backed companies that support the majority of residential mortgages in the United States, into the public markets.
Plans to privatize the two organizations have been in the works by Trump supporters. After the financial crisis in 2008, the government took ownership of the two government-sponsored businesses. They buy and securitize business and residential mortgages, then resell them on the secondary market. During his first administration, Trump attempted to privatize these two housing-finance companies, but the epidemic put a stop to that plan.
“Any sane individual would argue that the 16-year conservatorship of Fannie and Freddie was never necessary,” Dworkin said. “But it’s important to be cautious when pushing them to the public markets again,” he added.
“Any threat to the secondary market’s stability and liquidity is the industry’s biggest concern,” Fratantoni stated. In order for lenders to provide loans to homebuyers, he said, liquidity—that is, simple access to funds—is “paramount.”
However, even if Fannie and Freddie become public again, the 30-year mortgage will remain in place. Fratantoni states, “the 30-year mortgage has been a hallmark of the U.S. housing market.” The product will remain in use since it is a consumer favorite in the United States. The secondary market’s liquidity and price stability are more important factors.
6. A Positive Change In The Economy
Nothing changes right away for the typical house buyer when Trump takes Biden’s position in the White House.
There will still be a shortage of homes. Rents and house prices will rise in tandem with an expanding economy. According to a professional economist, the cost of borrowing is unlikely to decrease significantly.
Additionally, experts predict that the economy will perform better under Trump. Despite rising mortgage rates, people will begin to feel better about the economy and be prepared to extend their finances to purchase homes.
Wrapping Up
With Trump’s success, there has been a wave of change in the housing economy of the USA. However, you may be confused about whether it is the right time for real estate investments as housing prices rise. To know the answer, you can join the Dream Home Mortgage webinar on 21st November at 7:30 PM. This webinar is free, but the seats are limited. So, register now to secure your spot and get all the information about housing marketing from their experts. Register now!
