Housing Market Outlook under President-elect Donald Trump
Affordability Concerns
The housing market has undergone a significant shift since President Trump's first term. Affordability has plummeted due to soaring home prices and mortgage rates. The median home price now sits at $420,400, a 35% increase from before Trump's initial election. Moreover, 30-year fixed mortgage rates have climbed to over 7%, up from 4.09% in 2017. This has resulted in a monthly mortgage payment increase of $594 for a family putting down 20% on a $400,000 home.
Slowed Activity and Low Supply
Declining affordability has led to a slowdown in buying and selling activity. Homeowners are reluctant to give up their low-rate mortgages, contributing to a decline in existing home sales. The market is projected to hit its lowest point in nearly 30 years in 2024. Furthermore, finding homes within affordable price ranges has become increasingly challenging.
Trump Administration's Policy Proposals
The incoming Trump administration has pledged to reduce mortgage rates and home prices through mass deportations of undocumented immigrants and relaxed building regulations. However, experts caution that such sweeping changes are complex and could have unintended consequences. Trump's proposed tariffs, for instance, may exacerbate inflation and further reduce housing affordability.
Construction Challenges
Supply chain disruptions caused by the COVID-19 pandemic have inflated the cost of construction materials. Trump's plans to impose 25% tariffs on imports from Canada and Mexico and additional tariffs on Chinese goods have raised concerns among economists about worsening the situation. The National Association of Homebuilders estimates that 7% of materials used in residential construction were imported in 2023.
Labor Shortages
Mass deportations could reduce the construction labor force, aggravating the supply shortage. Nearly a third of construction workers are foreign-born, and in California, immigrants account for 41% of the industry's workforce.
Mortgage Giants and Federal Reserve
Trump is expected to move forward with releasing Fannie Mae and Freddie Mac from federal conservatorship. However, this process is complex and could have significant implications for the mortgage market. The release of these companies may increase borrowing costs for Fannie Mae and Freddie Mac, potentially impacting mortgage rates for consumers.
Conclusion
The incoming Trump administration faces challenges in addressing the deteriorating housing market. Affordability concerns, supply shortages, and policy proposals that may have unintended consequences are among the key issues that will shape the market in the coming years.