Housing Affordability Challenges in the Trump Presidency, Revisited

The incoming Trump administration inherits a housing market vastly different from the one it encountered during its first term. Affordability, driven by elevated home prices and mortgage rates, has deteriorated significantly, dampening consumer sentiment towards the economy.

Key Market Indicators

* Average 30-year fixed mortgage rates hover above 7%, a stark rise from 4.09% at the start of Trump's first term.
* A family putting 20% down on a $400,000 home faces monthly mortgage payments $594 higher than in early 2017.
* Median home prices in the US have surged to $420,400, a 35% increase over the pre-Trump era (when they stood at $310,900).

Proposed Solutions and Expert Concerns

Trump's administration has pledged to lower mortgage rates and home prices through mass deportations of undocumented immigrants and deregulation in construction and land use. However, economists and housing experts caution against simplistic solutions and emphasize potential risks:

* Mark Zandi, chief economist at Moody's Analytics, dismisses the possibility of reducing rates amidst higher tariffs, immigrant deportations, and deficit-financed tax cuts.
* An NAHB analysis suggests that 7% of materials used in residential construction were imported in 2023, posing inflationary risks from Trump's proposed tariffs.
* Deportations, while aimed at reducing housing demand, could exacerbate supply constraints due to the significant number of immigrants in the construction labor force.
* Policies like tariffs and tax cuts could force the Fed to maintain higher rates to prevent economic overheating and broad-based price increases.

Fannie Mae and Freddie Mac

Releasing Fannie Mae and Freddie Mac from government conservatorship remains a priority for Trump. However, the process will require time and significant capital increases to meet regulatory requirements. Moreover, the transition could affect the companies' credit ratings and borrowing costs, impacting the $12 trillion mortgage business.

Conclusion

The housing market landscape during Trump's second term presents unique challenges. Addressing affordability concerns while navigating potential inflationary risks and maintaining a balanced release of Fannie Mae and Freddie Mac will be crucial for the administration's economic agenda.