The housing market and home loan industry have changed dramatically since Donald Trump’s term in office. Historically low interest rates ticked up to their highest point in 20 years, a red-hot seller’s market cooled and inventory dried up.
But what might change if he wins a second term?
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“The potential effects of a second Donald Trump term on the housing market and people’s mortgages can be analyzed from several angles based on the policies and economic strategies previously observed during his first term,” said EZ Sell Homebuyers founder Mike Wall, a full-time realtor and real estate investor who has sold more than 1,700 homes, flipped over 100 and purchased 31 investment properties during his 23-year career.
Here’s how a Trump victory could impact the housing market and your mortgage.
Deregulation Could Be a Blessing and a Curse
As president and as a candidate, Trump has consistently expressed his disdain for what he calls excessive regulations across the economy.
“Donald Trump’s administration was known for its deregulatory stance, aiming to reduce the burden of regulations on businesses and consumers,” said Wall. “A continuation of this policy could lead to more relaxed lending standards and potentially lower the cost of obtaining a mortgage. This could stimulate demand in the housing market by making it easier for people to buy homes. However, it’s important to note that too much deregulation could also pose risks, such as leading to less scrutiny of borrowers’ ability to repay loans, which was one of the factors contributing to the 2008 financial crisis.”
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Tax Policies Could Impact Homeowners and Investors
Trump’s signature legislation was a comprehensive overhaul of the tax code in 2017. Several of the key provisions are set to expire in the coming year, and he has promised to make some of them permanent if reelected.
“Trump’s tax reforms, particularly the Tax Cuts and Jobs Act (TCJA), introduced significant changes to the tax code,” said Wall. “A second term could see further tax cuts or modifications that could affect the real estate market. For homeowners, the interest deduction cap on mortgages might be reconsidered, potentially influencing buying decisions. For real estate investors, changes to capital gains tax or continued benefits such as the 1031 exchange could affect investment strategies.”
His Policies Could Convince the Fed To Lower Interest Rates
The big news of the 2023 housing market was the Fed’s war on inflation and the interest rate hikes it used to slow rising prices. The result was expensive mortgages — but that could change course if Trump wins in November.
“While the president does not directly set interest rates, the administration’s fiscal policy can influence inflation and economic growth, thereby indirectly affecting the Federal Reserve’s decisions,” said Wall. “Trump’s previous term saw pressure on the Federal Reserve to keep interest rates low to support economic growth. A second term could continue to see a preference for lower interest rates, making mortgages more affordable and potentially boosting the housing market. However, this is contingent on the broader economic conditions and the Federal Reserve’s independent assessments.”
Infrastructure and Development Policies Could Alter Local Markets
According to Bloomberg, Trump previously campaigned on a $1 trillion infrastructure plan. The publication quoted him as saying, “We are going to fix our inner cities and rebuild our highways, bridges, tunnels, airports, schools, hospitals. And we will put millions of our people to work as we rebuild it.”
If that theme continues into a second term, building projects could benefit local housing markets.
“Trump’s focus on infrastructure and development could lead to increased investment in these areas, potentially boosting local housing markets where projects are undertaken,” said Wall. “Enhanced infrastructure can increase property values and attract more buyers and investors to an area.”
Aggressive Trade Policies Could Affect Home Prices
During his first term, Trump followed through on a promise to launch a trade war with China. If reelected, he’s vowed to rekindle and expand that policy to other nations.
“Trump’s trade policies, including tariffs and negotiations with trade partners, can have broader economic effects that indirectly impact the housing market,” said Wall. “For instance, tariffs on Canadian lumber increased the costs of home construction, affecting affordability. A second term could see continued or new trade policies that could either benefit or challenge the housing market, depending on the specifics.”
Of course, all of this depends on Trump being reelected in November, and even if he is, many factors beyond the president’s control can impact the housing market — but elections matter, and the next president will inherit a housing market in transition.
“In conclusion, a second Donald Trump term could potentially stimulate the housing market through deregulation, tax policies favorable to property owners and investors and a preference for low interest rates,” said Wall. “However, these policies also carry risks, particularly if deregulation leads to unsustainable lending practices or if trade policies adversely affect the costs of construction materials. As with any administration, the actual impact would depend on the specifics of the policies implemented and the broader economic context.”
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This article originally appeared on GOBankingRates.com: How a Trump Win in 2024 Could Impact Your Mortgage and the Housing Market
