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How Does Trump Affect the Real Estate Market?

March 28th, 2017
The new US President, Donald Trump is a renowned real estate man who is now the most powerful man in the world. It is not yet known what his policy platform fully entails, however it should almost certainly have an effect on real estate as a whole. There is a large degree of uncertainty relating to this president, as we have not yet seen someone like him enter the White House before. Although economics and politics do go hand in hand, the housing market fluctuations in the future are not only influenced by the president. Mortgage rates and housing prices will fluctuate due to other major influencers like buyer demand, interest rates and inflation.

In a recently conducted survey by Trulia, the surprise Trump victory returned a sense of optimism to Republicans and a pessimistic change of feelings to Democrats in relation to real estate in 2017. We could very well be seeing a surge in real estate activity across the red states also from blue state investors, following higher consumer confidence in the red states in the short term.

Real estate is a critical part of the US economy, which affects buyers, sellers, landlords, homeowners and renters alike. Will a Trump presidency raise the bar on real estate to even greater heights? Although we can currently only speculate and wait for the surprising election results to wear off, here are some other areas where the Trump presidency could possibly impact the market.

Increased Government Spending, Tax Reforms and Interest Rates

Potential upgrading of infrastructure to boost the levels of the inner cities and significant allocation to the defense budget, along with additional government spending could provide a spurt of economic boost to the nation's economy in 2017. The Federal Reserve will also probably boost short term interest rates. However if Trump's promised tax cuts, reductions in regulation and large spending initiatives do materialize, it will all lead to significant growth which will outplay higher interest rates.

Inflation would probably rise from the higher GDP growth also leading to moderately higher interest rates. These factors could affect mortgage rates which might be a higher in a year's time.  There are still questions relating to Trump's financial regulations and tax reforms and how they might affect the economy and housing market overall.

Making America Great Again – More Jobs

One of Trump's major election cards was for Making America Great Again, as in more American jobs for Americans. Trump called for a rise in defense spending which will bring jobs to the defense contractor sector, in addition to plans for revamping the inner cities infrastructure. If it goes according to plan, and significant employment is added across the nation, home prices should go up. A steady increase in jobs will act as a driver of growth for the real estate sector, and housing will rise accordingly at a significant pace.

Dodd-Frank Reform?

In 2010 the Obama Administration passed the Dodd-Frank Wall Street Reform legislation, a transformative regulatory package to overhaul the US financial regulatory system, which was introduced to help prevent another housing boom and bust scenario. In effect, Trump has stated that Dodd-Frank is on the table for reevaluation as it has elements which slow down the rate of bank lending and keep some homebuyers from potentially getting loans. Any change which will eventually lead to loosening credit, allowing for more homebuyers to borrow, would most probably lead to greater demand in the housing market, with expected rise in home prices to follow.

The Immigration Question

From the outset, the question of how Trump will tackle the illegal immigrants question looks like the primary hair-raising scenario for US real estate which could actually rock the boat in the short term. The question is whether it was just a part of his campaign to get in to office or will he act on a big way upon his promises?

It is highly doubtful that we ought to see mass deportations of illegal immigrants which will affect the job sector and resonate from the top to the bottom of the housing chain. At the end of the day, Trump understands economics and according to the statistics, immigrant contributions to housing demand in this past decade accounted for significant growth in all areas of the housing market. An implemented Trump plan to deport waves of immigrants would have significant consequences for the national economy and the whole of society. Although many of Trump's supporters do not understand the value that immigrants bring to the housing market, Trump as a real estate and money man understands it.

On the other hand, a move to build a wall between the US and Mexico is a formidable infrastructure project which could be a stimulus and creator of jobs. The one thing for certain is that things will look different from inside the oval office, and we do not yet know how this presidency will affect the housing market for the years to come.

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