Now that the election is over and a new administration will be at the helm, some policy changes are likely coming that could impact the real estate market. While we don't yet know what priorities will become realities, there are some things we will be watching in the months to come. Let's look at what has been proposed so far and consider what it may mean for the market in the coming years.
Interest Rates
There have been claims made the president would lower mortgage rates, although there is no clear mechanism for the president to do so. Mortgage rates are, instead, based on expectations of the future inflation rate. If policy is put in place that further stimulates the economy, it will likely have an inflationary effect, which will cause interest rates to increase rather than decrease. It may be that we won't see any mortgage rate relief in 2025.
Immigration/Deportations
According to Realtor.com "In the short run, reducing immigration could severely hurt the labor supply needed for new home building since up to a third of residential construction employment consists of foreign-born workers.” If deportations result in a tightened labor force, it would increase the cost of what labor is left over, likely resulting in higher home prices and longer build times for new homes.
Tariffs
CNBC says imposing tariffs would likely increase the cost of goods that go into home building. If the cost of goods increases, the price of new homes will likely increase as well.
Regulatory Changes
Republican administrations typically focus on tax cuts and reducing regulations. Reducing regulations on home builders could boost the number of homes being built, but Realtor.com says that impact would likely be limited at best:
Trump has called for slashing regulations and permit requirements that homebuilders say add unnecessary costs to new homes.
“We will eliminate regulations that drive up housing costs with the goal of cutting the cost of a new home in half. We think we can do that. The regulations alone cost 30%. Regulation costs 30% of a new home,” Trump claimed in a September speech at the Economic Club of New York.
However, those figures appear to be dramatically overblown. The National Association of Home Builders, a longstanding industry critic of regulations, estimates that site work and related permit fees account for 7.4% of the average new-home cost, with overhead and general expenses accounting for an additional 5.1%.
Building on Federal Land
Trump has proposed building on federal land as an idea to spur building and increase supply. This is unlikely to have much impact on our local market as there is very little buildable Federal land in and around the cities of the Front Range.
Our Take
The upcoming administrations proposals seem like something of a mixed bag for the real estate market. It doesn't sound like anything that has been proposed so far will drastically impact our market conditions.
One thing we can be certain of is that many buyers and sellers have been feeling a sense of uncertainty over the last few months, partially due to anxieties over how the election will turn out. Now that the election is over, and as those anxieties subside, there will be room for a renewed sense of confidence as to where we are heading economically. We're hopeful that will lead us back to a market that feels more predictable and balanced than the one we've had for the second half of 2024.
If you'd like to read more, here are a couple articles we found useful:
Here's what the Trump presidency could mean for the housing market, experts say
Donald Trump Will Return to the White House: What His Presidency Means for the Housing Market
Marketwatch: 6 ways a second Trump presidency will affect home buyers and sellers
As always, please don't hesitate to reach out. Until next time-
Allison and Ken
