With the election of a new president the country faces many changes, both known and unknown. For real estate agents and those with a vested interest in the Los Angeles real estate market, the pressing question is: What effect will the Trump administration have on the housing market?
A Real Estate Mogul In Office
The president-elect is a real estate mogul, who started his career young and built an incredibly successful business. People are wondering, and speculating, what kind of impact this experience will have on the housing market and the American people, both immediately and in the next four years.
Immediate Reactions Down Party Lines
Ralph McLaughlin, chief economist at Trulia, told Market Watch that the immediate reactions may differ in each state or locality, directly correlating to its party affiliation. “Home buyers in economically healthy blue states will likely be rattled and more hesitant about the future of the U.S. economy, which will curb their interest in making large investments,” he said. Meanwhile, homebuyers in red states may feel a force of confidence which could make big real estate purchases an easier decision and increase demand.
Moving forward, with a Republican in the White House and a Republican majority in the House and Senate, Forbes’ Lawrence Yun predicts deregulations, including a loosening approval standard on mortgage underwriting, to “more normal lending.” During his campaign, Trump mentioned he would work to repeal the Dodd-Frank Wall Street Reform and Consumer Protection Act, legislation that was passed by President Obama in 2010 to address causes of the Great Recession. While he may not be able to completely repeal the act, Trump is likely to approve immediate revisions to it, potentially freeing up restrictions that Dodd-Frank placed on mortgage lenders and making it easier for homebuyers to get approved.
Yun also predicts loosening of regulations on land-use and zoning. New home prices during President Obama’s term were exponentially higher than those of older homes in the same neighborhoods, due to the high cost of construction and regulations. “There could be less regulatory land-use and zoning burden for home construction, and thereby lower the cost of building,” Yun said.
Fluctuation in Mortgage Rates
As the markets respond to the election results, CNBC reports that investors who see the new administration as “a boon to the economy overall and the banking sector specifically” are flooding the stock market and pulling out of bonds. Selling in the bond market initially “pushed mortgage rates to a psychological breaking point.” At 4 percent, mortgage rates were nearly half a percentage point higher than before Trump was elected president. While they’ve since recovered, economists are waiting to see if the trend continues as it could have an immense impact on the housing market, forcing sellers to lower asking prices to compensate for higher mortgage rates.
Increased Jobs & Wages
While specific housing policies remain uncertain and inauguration still a few months away, Trump has promised to increase jobs and wages, which would undoubtedly positively impact individuals’ opportunities for homeownership which had been stalled.
The president-elect Donald Trump made a lot of promises during his campaign, but hinted very little to policies within the housing market. Co-director of the Urban Institute’s Housing Finance Policy Center Laurie Goodman told The Washington Post, “We are totally guessing…It could be that housing is not on his list of things to do and you don’t end up with much change over the status quo.”