Political experts were stunned when Donald Trump was named to become the next President of the United States. Many are now wondering what that would mean for real estate.
It’s common for the president to use housing as a vehicle to lead economic recovery, and with Trump being a licensed broker, real estate professionals have been keen to see how his policies would affect them.
How will an impending Trump presidency change the real estate market? Here are some possible outcomes.
Will he use real estate to kickstart the economy?
Trump has used real estate himself as an investment, and although he hasn’t said much about his housing platform, what he has said indicates that he’s interested in boosting home ownership.
Much of Trump’s platform has centered around deregulating the financial market in order to more fully revive it, and that alone could also give a boost to real estate.
What will happen to mortgage rates?
“Mortgage rates are falling because investors are seeing safe yields in U.S. mortgage backed securities, reflecting their confidence in the relative safety of the U.S. housing market,” wrote Trulia chief economist Ralph McLaughlin this morning in a statement. “Furthermore, the Fed is likely to delay a December rate hike because of global economic turmoil. Both effects mean short term win for borrowers, and we’ll likely see an increase in mortgage refinancing if rates continue to plummet.”
Will there be cutbacks in federal programs?
In the 1980s, Ronald Reagan cut back on many federal programs (such as mental health care) in order to trim the national budget.
Some programs, such as those involving affordable housing, might have more of an effect on real estate than others, but Trump has not indicated which programs he would be most likely to target for cutbacks.
“While local and state policies are likely to be unaffected, major programs — such as the Low Income Housing Tax Credit and Section 8 housing vouchers — could be on the table for reform,” said McLaughlin.
This is something that Trump — and the Republican party as a whole — has been vocal about.
In July, the party approved its 2016 platform. That platform includes significant changes to the Consumer Financial Protection Bureau (CFPB), and there has been talk of repealing the Dodd-Frank Act, which imposed regulations on lenders, and replacing it and the CFPB with something else.
Loosening regulation on lending could potentially boost home ownership by making it easier for consumers to obtain loans.
In August, Trump also told a meeting of the National Association of Home Builders, “There’s no industry, other than probably the energy industry, that is more over regulated than the housing industry … Twenty-five percent of costs to build a house are regulations. I think we should get that down to 2 percent.”
If construction is deregulated to some extent, this could mean more affordable homes for consumers.
Will there be reforms at Fannie Mae or Freddie Mac?
Fannie Mae and Freddie Mac, two government-sponsored enterprises (GSEs), are currently under government conservatorship — and although figuring out what to do with the behemoths is bound to be difficult, it’s also likely to fall into Trump’s lap.
The GSEs are projected to run out of funds in 2018, so if we don’t have a plan by the time that happens, we’ll need one.
What about immigration?
This is a big unknown — if Trump does, indeed, tighten immigration policies as outlined in his platform, then the United States could see some softening in markets that rely heavily on overseas investors, who might face additional difficulties or hurdles in purchasing property.
However, Trump’s immigration policy has undergone many changes since he first announced his candidacy, and immigration reform won’t be an easy bill to push through, so it’s difficult to determine whether this will influence the real estate market to any large degree.
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