Unraveling Trump’s Housing Market Conundrum!

“A significant portion of President Trump’s statements are concerning for the direction of home prices,” stated Parrott. He highlighted Trump’s promise of mass deportations which could hinder home construction. While an increase in immigrants can generate greater housing demand in areas with limited housing supply, potentially intensifying competition for homes, they also contribute to the expansion of the housing inventory due to the substantial involvement of undocumented immigrants in the US construction sector. Trump’s other policy propositions also pose a threat to escalating the cost of purchasing a home.

“The predominant factor influencing affordability is mortgage rates,” remarked Lawrence Yun, the chief economist at the National Association of Realtors. “A reduction in the current 7% mortgage rate to around 6% or lower would substantially impact affordability.” Despite the Trump administration’s pledge to decrease rates, mortgage rates align with the 10-year Treasury, influenced partly by the perception of future inflation trends. Trump’s proposal of broad-based tariffs, which some economists caution could reignite inflation, might sustain elevated interest rates and consequently, mortgage rates.

Elevated interest rates could impede homebuilders’ capacity to enhance new home construction. The initial Trump administration’s effort to privatize Fannie Mae and Freddie Mac, the major lending entities guaranteeing 70% of American mortgages, was unfruitful. A revival of this pursuit could lead to an increase in mortgage rates, according to Yun.

Is there a relief in the housing market pressures?

Addressing America’s housing crisis might emerge as a critical concern for voters in forthcoming elections, as stated by Jaret Seiberg, a financial policy analyst at Cowen. “We anticipate that the GOP will need to confront the rising prices of entry-level housing to secure future elections,” Seiberg noted. “The escalating costs in entry-level housing could pave the way for Democrats to excel in the midterm election and gain an advantage in the 2028 presidential election. Republicans, in our assessment, are mindful of this risk, which is why we anticipate proactive measures.”

Nonetheless, Yun of the NAR perceives a potential alleviation of some of the existing strains on America’s housing market. Properties are lingering on the market for longer durations, indicating that significant price reductions could be imminent. Additionally, pending home sales witnessed a fourth consecutive monthly increase in December, based on NAR data. Many prospective buyers are acknowledging that mortgage rates hovering around 6% are likely to persist and have ceased postponing their home purchasing plans.

“In my opinion, the lowest point in home sales was most likely reached in 2024,” Yun affirmed. “More individuals will likely achieve successful home purchases, and more sellers are entering the market to list their properties. I anticipate increased activity in the housing market this year.”

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