As an American businessman with an extensive background in real estate, it seems reasonable to assume that Donald Trump will pave way for growth in the real estate industry. Because of his experience, some of us believe he will have an (inevitable and, more importantly, positive) impact on the real estate market. However, Trump’s current lack of housing policy proposals leaves others apprehensive.
With this “lack of information,” it is quite hard to predict much about the future of this market and his direct impact. However there are a few assumptions we may be able to make based on Donald Trump’s background and his stance on certain issues. Here are some of our thoughts/predictions:
Housing Regulations– Trump’s campaign has swirled around deregulation, which means he may lean towards lightening up on housing restrictions. This could heavily impact states like Washington and Oregon, who have tight regulations on housing. Trump said “there is no industry besides the energy industry that is more over regulated than the housing industry.” However, most of this regulation happens on the state level and the President can really only try and use his power to ease it.
Lower Taxes- Can potentially mean more money in your pocket, which can theoretically (indirectly or directly) help you buy/sell/maintain a home or investment property… but this can also drive up inflation and interest rates. Historical studies have also proven that tax cuts lead to slower economic growth and inequality (only ever benefiting small population groups).
Mortgage Availability– Increasing the availability of mortgages by reducing qualifications will drive up demand.
New Infrastructure- Donald Trump has placed an emphasis on new infrastructure. “We are going to fix our inner cities and rebuild our highways, bridges, tunnels, airports, schools, hospitals,” Trump told his supporters. “We’re going to rebuild our infrastructure and we will put millions of our people to work as we rebuild it…”
Job Growth- Trump’s campaign placed an emphasis on his desire to create more jobs. Demand for housing (and the general economic health of the real estate market) is also dependent on income, rising incomes and more available jobs means more people will be able to spend on housing.
Housing Affordability– Fewer regulations could impact things like urban growth boundaries, which usually drive up home prices. Affordability is also dependent on how supply and demand is affected. Beyond that, Trump has focused his real estate profession on the luxury markets, which causes us to wonder if he is capable of creating (or caring) about a plan for affordability that meets the needs of a growing, working class that desperately demands it.
Dodd-Frank- Changes to the Dodd-Frank financial regulation will most likely occur in some way. A positive action would be lessening (or lifting) the compliance costs imposed on small banks, which will spur home building. However, there are a few good reasons that this was created, hopefully the good aspects of this regulation will remain…
Home Buyer Confidence– Everything listed above will have an influence on consumer confidence. However it is also quite perception-driven so, homebuyers in economically healthy blue states may be anxious about what lies ahead for the U.S. Economy, which will temporarily curb some interest in making large investments. On the other hand, stagnant red states will feel a boost of confidence, driving them towards opposite actions. Each will have its own obvious effect on supply and pricing.
Housing Supply- There is some dependence on consumer confidence; in areas with more hesitancy, there will be less demand or push for new housing. On the other spectrum, demand will be bolstered as consumers feel more confident, which will spur the need for more supply. Beyond that, if Donald Trump is successful in spurring massive rebuilding programs, this may also impact supply by consuming a lot of the available building materials and skilled labor. Some experts believe his stance on immigration may have an impact on housing supply as well, as immigration plays a big part in the labor force for construction. Supply would also be affected if mortgages were made more available as more people are able to enter the market.
All we can do is wait and see how his policies develop. We don’t expect major changes just yet.