How the Housing Market Could Be Affected by President Trump, Economists Predict
Written by
J. Arky
Edited by
Gary Dudak
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Donald Trump’s administration has made your next economic move anything but predictable. When it comes to big purchases like real estate, having volatile home prices or supply and demand can make a difficult situation even harder.
The housing market also often points to other economic issues, creating a domino effect for American homeowners. GOBankingRates put out the call to economists and real estate experts for their takes on what might happen during Trump’s second term as president.
Quick Take: Trump’s Tariffs vs. The Housing Market
The tariffs that Trump has imposed on global trade and imports could have both a short-term and long-term impact on the already expensive housing market. Here are a few key takeaways:
- Housing costs and construction prices will increase from the source, as raw materials such as lumber, stone, steel, and copper could cost more for both home builders and owners alike. Simply put, when builders face higher input costs, a portion is passed on to consumers as higher home prices.
- The National Association of Home Builders (NAHB) estimated that before the recent 50% tariffs on steel and aluminum, tariff activity added roughly $10,900 to the average cost of a new home. This could also reduce the number of homes being built, which would create a housing shortage, and lead to higher pricing thanks to warped supply and demand.
- Home maintenance and renovations could also face higher prices as tariffs will likely increase the costs of appliances, drywall, fixtures, cabinetry and glass, to name a few.
- Economic uncertainty caused by tariff and market fluctuations has an impact on borrowing costs, which could consequently affect mortgage rates.
Now let’s see what our experts think about Trump’s affect on the housing market.
Lower Finance Rates
According to Marty Harlee, president and CEO at First Trust Financial, Trump in office again means there could be “another massive refinance boom along with a record number of home sales.”
He added a prediction that Trump will “recommend to the Federal Reserve to lower the interest rates. He would recommend this because it is the best and most effective way to move the economy upward quickly — and our current market could certainly stand a boost. Lowering rates would move every other industry upward as well.”
Harlee said this could extend to car sales and refinancing, home equity lines of credit and many other sectors of the economy.
Would Tax Cuts Boost the Housing Market?
“Under the Trump presidency, economic policies will likely continue to emphasize deregulation and tax cuts, which could stimulate economic growth and potentially increase disposable income for many Americans,” said Dennis Shirshikov, a professor of finance, economics and accounting at the City University of New York.
He predicted that this move could boost the housing market by increasing demand for homes.
“For instance, the Tax Cuts and Jobs Act of 2017, which Trump signed into law during his first term, led to an increase in after-tax income for many individuals and businesses, providing more capital for home purchases and investments in real estate,” Shirshikov explained.
Harlee added, “Interest rates also affect the investment industry, in particular the S&P [500]. Donald Trump is real estate heavy in assets and will definitely try to take advantage of this while he is in office.”
Kateryna Odarchenko, a political strategist who also holds a real estate license in Maryland, said, “The topics of housing and construction are increasingly significant in American politics. The rising cost of living and housing affordability are major concerns for many Americans, with inflation only worsening these issues.”
She added, “These efforts have implications for future homebuyers and the housing market at large. His administration also introduced tax reforms such as ‘opportunity zones’ to stimulate investment in underdeveloped areas and capped property, income and sales tax deductions, affecting homeowners differently across the country.”
Housing Prices Might Increase
When examining the possible negative impacts of Trump’s second term and how it would affect the real estate market, Harlee believes the only downside “would be when rates do come back down, the price of housing will also increase and the supply of available housing will also decrease” However, he added that in general, “interest rates and the housing market always do well with Republicans in office.”
Would Inflation Spike Rates Again?
“While deregulation and tax cuts can stimulate economic activity, they can also lead to inflationary pressures,” Shirshikov said. “The Federal Reserve might respond by raising interest rates to control inflation, which could make mortgages more expensive and reduce housing affordability. Higher interest rates typically lead to higher monthly mortgage payments, which can deter potential homebuyers and slow down the housing market.”
Shirshikov also noted, “Trump’s [first term] was marked by significant market volatility, partly due to his unconventional approach to policy and communication. This unpredictability can create uncertainty in the housing market, causing potential buyers and investors to hesitate.”
Odarchenko said, “I believe that affordable housing programs might be restructured, as this topic is more aligned with Democratic agendas, focusing on development around more diverse communities and promoting diversity.”
Odarchenko pointed out that two of the main issues for Americans right now are the cost of living and housing affordability amid inflation.
“Thus, the question of housing accessibility is one of the most important for both Democrats and Republicans,” she said. “Considering Trump’s work with developers and his overall background in real estate, these are positive developments for the market.”
Shirshikov anticipates that “economic policies would likely continue to emphasize deregulation and tax cuts, which could stimulate economic growth and potentially increase disposable income for many Americans. This, in turn, could boost the housing market by increasing demand for homes.”
Caitlyn Moorhead contributed to the reporting for this article.
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