4 Ways Trump’s Win Could Affect the Housing Market in 2025
Written by
G. Brian Davis
Edited by
Zuri Anderson
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Real estate has been a roller coaster over the last four years. Home prices surged during the pandemic, followed shortly after by rents, then interest rates soared and stamped down the growth of both.
The last two years has seen a “homeowner lock-in effect,” with nearly 90% of homeowners last year enjoying mortgage rates under 6%, according to Redfin — and loathe to trade them in for a higher rate.
That’s led many would-be sellers to hang tight rather than list their home for sale, squeezing supply.
With Donald Trump re-entering the Oval Office come January, what can homebuyers and sellers expect in the coming year?
Regulation on Construction and Housing
Land developer Cody Bjugan, founder of Allied Development, put it succinctly: “We have a housing shortage across America, creating affordability issues. The median home price is around 5.2 times the median household income. This ratio indicates housing affordability remains a significant concern.
“Trump has pledged to ease regulations to help builders and developers boost the supply of housing in a bid to bring down home prices.”
Jenna Stauffer, global real estate advisor at Sotheby’s International Realty, also sees more construction and housing supply on the horizon.
“Trump seems intent on increasing supply by loosening building regulations and aiming to encourage more private developers to step in,” she said. “By loosening these regulations it could be easier, faster and potentially cheaper for private developers to build new homes.”
Tax Policies and Deductions
With Republicans sweeping both houses of Congress, pundits expect Trump to succeed in extending the tax rules from his signature Tax Cuts and Jobs Act (TCJA) of 2017.
The changes include doubling the standard deduction and capping state and local tax (SALT) deductions. The changes mean fewer Americans itemize their deductions, and it reduces the tax breaks for high-income homeowners who pay hefty property tax bills. That in turn leaves middle-income families with lower net tax rates — and more money to put toward buying a home.
Of course, that itself puts upward pressure on home prices.
Another tax rule of the TCJA almost certain to be extended is bonus depreciation. It lets apartment developers and investors deduct more depreciation in the first year of ownership, further incentivizing new development of rental units. It also incentivizes investors to buy dilapidated apartment buildings and improve them.
“We will likely see tax incentives boost residential real estate markets nationwide, particularly in inner cities where Trump has voiced an interest in revitalizing,” said entrepreneur Brenda Christensen, who worked in commercial real estate herself.
Impact of Immigration and Economic Policies
Christensen sees a mixed bag in Trump’s economic policies and how they’ll impact housing.
“Trump’s tendency toward deregulation will further lower the barriers to entry in the housing market by lowering building costs. That should improve affordability,” she said.
“However, expected tariffs on imports — such as building materials — could cause a brief disruption to supply chain dynamics.”
While many analysts predict an increase in housing supply, mortgage lender Jaye Hohman of Hohman Finance also sees downward pressure on prices and rents from the demand side of the equation.
“Most estimates of the number of [immigrants living in the U.S. illegally] in the U.S. are above 10 million,” he said. “Under Trump’s proposed mass deportations, there will be a significant decrease in total demand for both apartments and homes. Weaker demand implies a softening or fall in rents and home prices.”
Mortgage Rates
Hohman predicts higher mortgage rates to further depress home prices.
“Pro-business policies are good for the stock market, and when stocks go up, bonds traditionally fall. Lower bond prices mean higher yields, which drive up mortgage rates,” he said.
“So, it is likely in the near-term that mortgage rates will continue to rise, putting negative pressure on home prices. I expect home prices will fall dramatically in 2025.”
Stauffer also hones in on mortgage rates.
“Ideally, we’d need rates around 4% to ease the ‘lock-in’ effect we’re seeing,” she noted. “Lowering rates would boost buying and selling activity which would make a huge difference in the market.
“That said, I don’t see a major drop in interest rates coming in 2025 unless there’s a significant economic shift. People may need to accept that rates could stay where they are for a while.”
The prospect of dipping home prices and rents in 2025 could fill you with either hope or dread — depending on which side of the transaction you find yourself. First-time homebuyers and renters would welcome more affordability, while homeowners and investors would lose money.
Not everyone foresees softening home prices or rents. Goldman Sachs forecasts 4.4% appreciation in home values next year. The proverbial grain of salt: they made that prediction before knowing the outcome of the election.
President-elect Trump is notoriously unpredictable however, so all forecasts remain speculative as we approach a new year and new presidential term.
Editor’s note on election coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.
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