How is the Trump presidency impacting the housing market?
How is the new administration really affecting the real estate market? How have expectations matched up to reality so far? What changes could be in the works? What moves should real estate investors be making this year?
The Big Expectations of the Trump Presidency
All politics aside, if there was one main driving factor behind Donald Trump’s presidential win, it was probably economic reasons, and specifically real estate reasons. Even those that may not have shared the president’s opinions or liked his comments on most things, saw Trump as the real estate president. The housing market had begun looking shaky before the election, and many believed another dip was in process. That would have crushed the incomes of millions of companies and even more workers reliant on them. It would have thrown homeowners back into the abyss of negative equity, and coming so soon after 2008, may have killed off belief in homeownership and real estate for generations.
It was believed that Trump’s interests in real estate would lead him to bolster and strengthen the market, and help boost property values. It was anticipated he would tackle taxes, lending issues, regulations, and more, to elevate the market. At least during his run in the White House.
The Reality, So Far
So far, the new president doesn’t seem to have changed much. At least from a tangible, legal standpoint. In fact, all of his legislation efforts appear to have been shut down and blocked, one after the other. On the bright side, that has some doubters, like Mark Cuban, actually warming up to him, and may encourage a larger cross-section of the population to get back to business.
The one tangible thing we do seem to have since the election is higher interest rates. That is a trend only likely to continue for the foreseeable future.
Most notably is the surge in investment and real estate purchases in reaction to the election. People and businesses have been incredible optimistic. That has driven new home sales records, expectations for new loan origination records this year, and has boosted the appetite to US real estate from around the world.
Of course, there are still ongoing foreclosures, and the need for properties to be recycled and updated, as well as the need for good investment returns. This all means that there are still great real estate investment opportunities across the country for those that know where to look.
What Could Be…
Trump is still in the early days of his presidency. He does seem to have had a positive impact on jobs, and new development. He certainly isn’t shy of making bold attempts to change things. So, there could be some significant, tangible changes which boost the housing market, and extend the current bull-run even further.
Among these could be removing the head of the Consumer Financial Protection Bureau (CFPB), easing regulations on banks and mortgage lenders, and reducing business taxes for real estate investors. In the process these moves could create more jobs, more confidence in the market, and may improve the profitability of investing in real estate and making real estate loans, while reducing risk.
If he is successful in these efforts, then we could be in for a long upward run.
All Real Estate Is Local
It’s important to remember that all real estate is local, and while the fundamentals can’t be ignored, sentiment continues to be a main driver of the direction of the market.
There is a lot of optimism out there right now. However, that alone doesn’t appear to be helping some markets. The extreme dynamics of high priced markets like San Francisco and lack of affordability has already been causing some changes in trends according to Zillow. Zillow predicts some major markets like San Fran will peak and begin losing value this year, following a decline in rental rates. Other, more affordable markets are expected to keep growing.
Whether or not Trump is successfully in changing laws and regulations, there is expected to be ongoing growth in many US housing markets. Investors should remain alert to changing patterns, and be positioned to make the best of opportunities, without exposing themselves to risk.
Ways to do this include:
- Adding real estate wholesaling to the strategy mix
- Adjusting buy and hold rental property portfolios in favor of growth areas
- Getting ahead of the curve in markets about to experience new growth
- Being wary of getting stuck in extended rehabs in markets which may already be correcting