What Trump Could Mean for Real Estate
Now that the election is over, what changes can we anticipate in real estate? Political pundits around the country were stunned November 8th when Donald Trump secured enough votes to beat Hillary Clinton to become the President-elect of the United States. While supporters from both sides are still reeling from the emotional night, it is important to know what Trump could mean for real estate.
According to INMAN and Thomas Mitchell, an impending Trump presidency will change the real estate market. Here are eight possible outcomes.
- Will he use real estate to kickstart the economy? He has said indicates that he’s interested in boosting homeownership. What Trump could mean for real estate? Much of Trump’s platform has centered on deregulating the financial market in order to more fully revive it. That alone could give a boost to real estate.
- What will happen to mortgage rates? “Mortgage rates are falling because investors are seeing safe yields in U.S. mortgage backed securities, reflecting their confidence in the relative safety of the U.S. housing market,” wrote Trulia chief economist Ralph McLaughlin this morning in a statement. “Furthermore, the Fed is likely to delay a December rate hike because of global economic turmoil. Both effects mean short term win for borrowers, and we’ll likely see an increase in mortgage refinancing if rates continue to plummet.”
- Could it become easier to borrow money? A Trump presidency could make it easier for consumers to own homes. That could lead to lower premiums for FHA loans or cutting guarantee fees for Fannie Mae or Freddie Mac.
- Will there be cutbacks in federal programs? Trump has not indicated which programs he would be most likely to target for cutbacks.
- What about regulations? This is something that Trump — and the Republican Party as a whole — has been vocal about.
- Banking regulations –Forbes says,”Changes to Dodd-Frank financial regulation will occur in some form. A clear positive would be the lifting of compliance costs imposed on small-sized banks. Around 10,000 local and community banks have traditionally been the source of funding for construction and land development loans. With less regulatory burden, these small banks can make more loans and will boost home building activity – something that is needed in the current housing shortage situation.”
- Building regulations – What Trump could mean for real estate is fewer building regulations. There could be less regulatory land-use and zoning burden for home construction, and thereby lower the cost of building. In recent years, newly constructed home prices have been much higher than existing home prices. Homebuilders say that is due to all the extra cost of regulation and not necessarily from higher input cost of lumber, cement, and worker wages.
- Employer/independent contractor regulations – If Republicans are successful in getting rid of some or all of PPACA or OSHA, then that could mean lower operating costs for small business, including real estate brokerages. It could also mean that agents are no longer required to purchase their own health insurance as independent contractors if PPACA is repealed or amended.
- Will the mortgage interest deduction go away? Last year, a tax plan that Trump shared specifically and explicitly showed what Trump could mean for real estate. It suggested that he would preserve the mortgage interest deduction. However, if Trump increases the standard deduction to $30,000, most people won’t need to worry about interest rate deduction.
- Will there be reforms at Fannie Mae or Freddie Mac? The GSEs are projected to run out of funds in 2018, so if we don’t have a plan by the time that happens, we’ll need one.
- What about immigration? Trump’s immigration policy has undergone many changes since he first announced his candidacy, and immigration reform won’t be an easy bill to push through, so it’s difficult to determine whether this will influence the real estate market to any large degree.
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