It is not partisan to acknowledge that the election of Donald Trump as our nation’s 45th president is unprecedented in many ways. The uncertain and unorthodox nature of a Trump administration raises questions and concerns about what our present political climate might mean for the real estate market, despite the fact that President-elect Trump expanded his fortune through real estate.
The following are three likely outcomes based on insight from pundits and market insiders:
- Short-term gains for affordable and mid-level housing mortgages, refinance, and construction: Deregulation in the banking and construction sectors, the loosening of
Dodd-Frank, investor confidence in the U.S. housing market, and a pause in interest rate hikes are likely to occur and influence growth and demand in the short term for the majority
of the market’s mortgages, refinancing, land development, and construction.
- Uncertainty for luxury housing: If the Trump administration asserts an aggressive position on the world stage, it could have a negative impact on the affluent end of the U.S. real
estate market. Nela Richardson, chief economist for Redfin, says, “If America becomes more isolated and less open, it could actually chill international demand for U.S. luxury
housing…so [Trump] is going to have to square his immigration policy with the reality that foreign buyers are a critical part of the housing market.” See footnote 1.
- Challenges for Fannie Mae and Freddie Mac: these longstanding government-sponsored enterprises (or GSEs) are projected to run out of funds in 2018. See footnote 2. GSEs act as government guarantees on mortgages by purchasing home-based loans from banks before packaging and selling them to investors on the open market. Legislation to preserve these
longstanding institutions will no doubt prove difficult, given Fannie Mae and Freddie Mac’s checkered past. But without this structure of these GSEs in place, residential real estate
mortgage lending could become susceptible to the kind of drop (90%) which hit commercial real estate lending during the Great Recession. See footnote 3. While Trump has remained
quiet about his administration’s likely real estate policy, analysts believe the signs point towards “survival” for the GSEs under a Trump administration. See footnote 4.
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