It’s no secret that Donald Trump’s win for the presidential office has shocked the world. While some are still trying to make sense of the outcome, others are focusing on the next four years. Some of the main points throughout Trump’s campaign were strengthening the United States, immigration laws and international trade laws. However, his campaign was vague about housing and real estate, leaving the industry to wonder what the future holds. While past administration changes have had little effect on the housing market, this term could be different being that our new President started his career in the real estate industry.
Real estate is a critical sector of the economy that affects buyers, sellers, renters, landlords and homeowners. President-Elect Trump’s background in real estate is what makes most individuals confident that not only will the economy improve, but so will the housing market. John Hunt, Owner/Principal of ViaSearch and MarketNsight says, “The best thing the Trump administration can do for our industry is to start peeling back the out-of-control regulations that have our development costs too high, putting new home prices too high above resale. A good start was to hire a guy to run the EPA who hates the EPA.”
Housing may not have been directly mentioned throughout Trump’s campaign, but he did focus on many aspects that will affect housing. In one campaign speech, he stated that he would immediately stop all new regulations from government agencies, while also analyzing current regulations and their effect on the economy. This is music to builders’ ears, with the average cost of government regulations accounting for more than 24 percent of the final price of a new single-family home according to the National Association of Home Builders. If Trump holds true to his promise to reduce regulations, the real estate industry will remain in a safe haven. Says Executive Vice President of Ten-X, Rick Sharga, “If President Trump is half as successful as his plans call for, the housing market will soar.”
The key to the housing market fully recovering depends on more jobs and better wages. Despite the current low unemployment rate, Trump is still calling for more jobs within the United States and higher pay. Together, these two things should be a big factor in allowing more Americans, especially the large Millennial population currently missing from the housing market, to purchase homes.
Another change we can expect to see relates to taxes. Trump has continually mentioned tax codes and how he hopes to change those to bring more income to the middle class and relief to small businesses. “Unless we change policies, we will not change results,” Trump has said. His choice for treasury secretary, Steven Mnuchin, was recently quoted as saying “the new President-Elect’s administration could initiate the largest tax change since Reagan.” While specific tax changes haven’t been released, it is expected that they will include reducing the number of tax brackets, capping itemized deductions and increasing the standardized deduction. While these changes are positive for individual consumers, it is yet to be determined the effect they may have on the housing market.
However, the outcome of the real estate industry is still undetermined depending on the policies that Trump will actually put into play. If Trump holds true to his statements of deportation and restricted visas, the industry could suffer through a chain of events. Construction labor is already severely limited; with millions of workers leaving during the downturn and not returning while others worry about deportation, an increase in both labor costs and construction costs would raise the price of homes tremendously. If that were to happen, developers would either put cost implications upon home buyers or completely pull back on projects all together, which could have larger effects on the overall economy.
Our current economy has proven strong since the wee hours of the morning following the election, which is evidenced by the rising stock market. There has also been a gradual upward trajectory in interest rates since the election, and the Federal Reserve has already hinted that we’ll see more rate hikes in 2017. While rising rates can make homeownership more expensive, it can also be a signal that more first-time borrowers will qualify, as a strengthening economy usually results in slightly more relaxed lending standards. Higher interest rates may also help slow home price appreciation, which has been rising steadily as the market truly recovers from the recession.
Homeownership is part of the American dream, but the middle class faces a lack of affordable housing. With Trump’s plans to decrease governmental regulations, grow the job market and earned wages, we expect to see more and more individuals able to afford housing for potentially the first time in their lives. If you’re ready to make the leap into homeownership, or are considering buying a new home while rates are still at historic lows, we can help!
As a leading Birmingham home builder, we offer beautiful new homes in six communities throughout the metro area. No matter what the outcome of the election, we will stand strong during the changes that will occur throughout the next four years. For more information on our luxurious new homes, visit the Harris Doyle website today!