Forecasting The Housing Market Under Trump.
The housing market is pretty complex and has a lot of moving parts. How are mortgage rates? How is buyer and seller sentiment? Are homebuilders building? How’s housing inventory? How’s the economy? To correctly predict the housing market you have to know the answers to the questions I just mentioned as well as there are other key factors. Knowing answers to these questions and watching for the other key factors is truly the only way to “correctly” forecast the housing market.
So under a Donald Trump’s administration what can we expect?
Let’s start with interest rates. It looks like there might be some small disturbances in the interest rates before Donald takes over the White House, but it looks like the Feds are leaning towards delaying a December rate hike. As long as rates stay low, it should signal a win for the borrower and keep a steady flow of potential home buyers in the marketplace. Once Donald takes up residency in the White House, as long as he can keep interest rates from jumping too high, we should expect a steady pool of home buyers in the marketplace. But all bets are off if we see interest rate head off into the 5’s and above.
If we are going to have a prosperous housing market, we need buyer and seller sentiment to remain high. Right now, buyer and seller sentiment seems positive for a majority of local housing markets. As long as buyers feel “now’s a good time to buy” and as long as it makes sense for sellers to sell the housing market should continue to tick up. On a side note: It also looks like Donald will preserve “mortgage interest deduction.” Although Donald’s plan doesn’t go into detail about the mortgage interest deduction, it looks good for home ownership.
Donald Trump has been very vocal about unfair building regulations. Right now home builders face stiff building regulations “25% of costs to build a home are regulations.” Donald would like to see that cost shrink to about 2%. If Donald is successful at deregulating building cost, we could see an influx of affordable new housing. And you know the saying “build it and they will come.”
One of the big unknowns under a Donald Trump administration is how our economy will fair. Donald wants to build a wall. Donald wants to repeal Obama Care. Donald wants to tighten up immigration policy. Donald has hinted he wants to repeal the Dodd-Frank Act and loosen regulations on lending. I could go on and on about what Donald wants to do, and most of it sounds good, but bottom line, Donald has pandered hyperbole to the masses with very little detail.
Unfortunately, Donald has said a lot but offered very little detail. And until we see Donald take and implement concrete plans that work, forecasting the direction of our economy and forecasting the housing market under a Donald Trump administration is foggy at best. Temporarily, nothing much should change drastically; we can expect much of what we’ve had over the last year or so.
I wish I had a clearer forecast, but my crystal ball isn’t offering much help. I think we will have to settle for a “wait and see mode.” With each passing month, under a Donald Trump administration, we should get a better glimpse into the housing market. In my humble opinion, they're a million ways the housing market can go and “time” along with the success of Donald Trumps administration will truly be the deciding factor.
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