How Will the Trump Administration Impact The Housing Market? | The Rueth Team

What will the new administration mean for the U.S. housing market? Whether you're a home buyer, investor, or a real estate professional trying to figure out what's on the horizon, it's crucial to know how current policies and apolitical economic shifts impact mortgage rates and home prices, as well as the real estate market stability. In this video, I want to break down everything that I've been researching about the potential impact of the incoming administration on our housing market. And if you're new here, I'm Nicole Ruth, wealth builder, real estate investor, and mortgage professional of over 23 years. If you find this video helpful, do me a favor and hit that thumbs up button and subscribe to my channel so you never miss a housing market or home buying update. All right, first up, let's talk about mortgage rates. Many of you have noticed that the mortgage rates have spiked back up above 7% recently, and there's a lot of speculation out there as to why it's happening. One conversation is that it's a post-election trade where long-term interest rates are being influenced by perceptions of the incoming administration's impact on the economy and inflation. And at the very same time, we are also seeing the release of resiliently strong economic data that is justifiably keeping rates higher. And it's important to note that while the president-elect was on the campaign trail, he spoke a lot about stimulating economic growth. And fiscal policies like tariffs and budget adjustments and government spending have a direct impact on inflation and ergo mortgage rates. I mean, higher inflation, more spending, stronger economies yield higher rates. It's possible that we could see higher borrowing costs for longer if there's more inflationary pressure, which means potential homebuyers might continue to feel the squeeze. Adding to this volatility is the influence from investors and speculators actively betting on the direction of the market. I mean, these speculators are not only reacting to political shifts, but also trying to capitalize on potential changes in monetary policy and economic growth. Their actions are directly contributing to rapid movements in bond yields, which, as we know, directly impacts mortgage rates. This kind of speculative trading can amplify rate swings, making the mortgage market even more unpredictable in the short term. It's also important to talk about the potential optimism factor. While this administration is causing a lot of divide, it can also bring economic confidence. And confidence can bring people off the sidelines and back into the housing market. Historically, mortgage applications increased after elections when economic growth was emphasized. But in 2024, we have a new twist. Affordability. Right now, the monthly cost of buying a home, factoring in the mortgage, taxes and insurance, is at an all-time high of around $2,800 per month nationwide. That's nearly double what it was during the 2016 election. With rates still in the sevens, affordability remains a serious barrier for many potential homebuyers. So while confidence might rise, and while some buyers might be motivated to a pro-business environment, many could still find themselves priced out. And as we all know, fewer buyers means less demand, which could have an impact on home prices moving forward. Before we dive deeper into the potential impact of the 2025 policies, let's look backwards at the Trump administration's first term, as many of their previous actions provide clues about what we might see again. During his first term, the Tax Cuts and Jobs Act was introduced. It lowered corporate tax rates from 35% to 21%, and it doubled the standard deduction for individuals. These changes stimulated the economy, increased disposable income, and has a positive effect on consumer spending, which indirectly boosted the housing market. However, there were also drawbacks. For instance, the cap on mortgage interest deductions at $750,000 and the limit on state and local tax, aka SALT deductions, to $10,000 had a significant negative impact on high-cost states. This limited the benefits of homeownership for many in those states, making it more challenging for homeowners to leverage tax savings. In addition to these tax changes, the Trump administration's deregulation efforts were aimed at reducing red tape. This included rolling back some of the aspects of Dodd-Frank, which made lending easier for financial institutions, creating greater access to borrowing for some homebuyers. While deregulation helped boost demand, it also relaxed some of the lending standards, which could pose risks if not managed carefully. Looking ahead, the president-elect has signaled that he wants to lower taxes again, a move that could boost disposable income and improve housing affordability. For homebuyers, this could mean more purchasing power, which might in turn push up home prices due to increased demand. He also wants to cut down on regulatory costs, making it easier for builders to develop new housing, potentially addressing supply shortages. However, these benefits come with potential downsides. One of the controversial focuses is on reducing immigration. This could have a direct impact on the construction labor market. With fewer workers available, labor shortages could drive up construction costs, making it more expensive to build new homes. And those increased costs will get passed on to buyers. Another element to consider is the Trump administration's ongoing desire to release Fannie Mae and Freddie Mac, our conventional mortgage lending solution, from government conservatorship. Now, admittedly, while privatizing these entities could reduce political influence and potentially create more innovative solutions, there are also risks. I mean, privatization could lead to reduction in government support for affordable housing programs. This would impact most low-income and first-time homebuyers. It as well as would remove the lower risk factor that comes with government backing, which could have an impact on increasing interest rates. The president-elect has also highlighted infrastructure investment as a major focus, which could indirectly boost local housing markets. Infrastructure projects create jobs, improve communities, and stimulate local economies, which could lead to increased housing demand in those areas. Additionally, he's made bold statements about wanting to bring mortgage rates back down to 3% to boost affordability. And while I would love that, I think these statements are meant more to elicit votes on the campaign trail than a policy position, because such low rates are both outside a president's control, as well as challenging if inflation remains high and the economy continues to grow. The challenge with promoting lowering rates while pushing for economic growth is that balancing of inflation. If the economy heats up from here, the Federal Reserve might be forced to keep interest rates high to control that rising inflation. Historically, interest rates drop when the economy slows, so a booming economy could actually mean higher rates for longer, impacting affordability for buyers. Ultimately, a president does have the influence to make sweeping changes, but requires the backing of Congress to do so. And the reality is, is that while political leadership matters, what's happening in the local political environment, as well as in the overall economy, and with the Federal Reserve, is just, if not even more, important. So what does all this mean for you as a potential homebuyer or investor in 2025? The landscape is shifting, which could dramatically impact the affordability and availability of housing, as well as open up incredible opportunities for those who know where to look. So bottom line, it's more important than ever to stay informed and to work with a market-educated team who can help you navigate these complexities. Given the Ruth team's national licensing, we are not only here to support your lending and strategic needs, but connect you with a local real estate agent we know, like, and trust. With all of that, I'd love to know your thoughts. Is it a good time to buy? Or are you still waiting to see how things shake out? And remember, if you want help with your mortgage questions, reach out to me. My contact information is down in the description. Let's strategize your next move together. Well, thanks for watching today. And if you'd like even more housing market updates, check out this video I have linked in the screen now. And I'll see you next time.