How President Trump Could Affect The Value Of Your Home
When it comes to the housing market, like so much else, Trump’s victory raises more questions than answers!
In July the U.S. Census Bureau announced that the homeownership rate in this country had hit its lowest level since the government began measuring the stat in 1965. Then candidate Donald Trump jumped on the news with a tweet suggesting the figure proved his most consistent message: the economy is failing you.
In a nation in which homeownership is largely seen as synonymous with the American dream, it’s easy to see why a change candidate would highlight the record low rate. But at the time economists urged Americans–and candidates–to look beyond the eye-popping headline number. It turned out the decline in the rate had not been due to fewer people owning homes, but to more people forming households in rental properties. In other words, the dip may actually be a (good) sign that more young people are striking out on their own. Trump, a billionaire by way of real estate development, should understand this.
Four months later the homeownership rate has ticked a bit higher to 63.5% (no tweet from Trump on that news) and Trump has been elected president. When it comes to the housing market, like so much else, Trump’s victory raises more questions than answers. Where does the president-elect really want to see interest rates go? What does he think about a push to dismantle Fannie Mae and Freddie Mac? Will this country become so unbearable for immigrants and minorities that many of those who aren’t deported choose to leave, taking their money with them and leaving empty homes behind?
Since Election Day Trump has said his first priorities would be cutting taxes and spending on infrastructure. If we take him at his word, the short-term prospects for the housing market are not bad. The longer-term outlook is harder to discern. As Donald, Melania and Barron get ready to (maybe) move into their new home, we take a look how Trump might pull the levers that impact the value of yours.
Demand: There are numerous ways Trump’s election could shake up Americans’ desire for housing. In the short term consumer confidence could track political party lines, which–probably not coincidentally–may mean a home sales slowdown in economically healthy blue-states and a sales pick up in red-states where growth has been slow. Notes Ralph McLaughlin, chief economist at real estate listing site Trulia: “These geographically polarized effects may help housing markets converge between the Costly Coasts and the Bargain Belt. The net effect on U.S. consumer demand for homes will remain unclear.”
Other Trump priorities could further complicate the picture long term. Trump’s tax plan, for example, would give the most substantial cuts to high earners. Oren Jacobson, an analyst at New Home Star, which works with builders to manage home sales, notes the extra cash should increase upper income spending but it may not lead to greater consumption of housing nationwide since the wealthy tend to live in areas where home prices are already bolstered by scarcity.
If the president-elect’s $550 billion transportation and infrastructure plan creates jobs and boosts wages it should lead to greater housing demand and prices. Meanwhile, Trump’s controversial immigration stance could limit foreign investment in U.S. real estate, as well as the number of people who move here (legally or not), limiting price growth and household formation. This could boost the homeownership rate, since immigrants tend to rent rather than buy, but not for the reasons economists like to see.
Supply: A lack of inventory is widely considered the biggest current drag on the housing market. In an August speech to the National Association of Home Builders, Trump suggested he will encourage builders to build. He called the home building industry one of the most regulated in the country and estimated that 25% of the cost of a home is due to regulation. “I think we should get that down to about 2%,” he said. Further emphasizing his support for the industry, he added: “There is no greater thing you can do. If you can build a home, you can build anything.”