Understanding Trump’s Impact on American Housing Market
With Donald Trump’s return to the presidency, we see how his second term may influence the American housing market. When he took office, markets were under pressure with high mortgage rates and inflation. Many areas were also experiencing significant supply issues.
Expanding our scope beyond the Chicago housing market, we’d like to explore the broader US market. Let’s examine the early impact of Trump’s second term in office.
Chicago Real Estate Market Watch
According to recent data, the median sale price of homes in Chicago increased by 7.7% from this time last year. However, Chicago real estate trends are always changing. Contact the MG Group team for assistance buying or selling homes anywhere in Chicago.
A Second Trump Term and the American Housing Market
An Early Look at Mortgage Rates
While Trump has vowed to prioritize lowering mortgage interest rates in his second term, the reality is more complex. The Federal Reserve, market activity, and broader economic trends influence rates.
The average 30-year fixed-rate mortgage was just below 7% at the start of Trump’s term. It saw modest declines in the early weeks of his presidency. However, rates spiked following his April 2 tariff policy announcement. Rates peaked at 7.10% on April 11. As of this writing, they seem to be slowly trending downward again. While many are hopeful this trend will continue, economic uncertainty and policy changes make forecasting difficult.
Impact on Cost of Building Materials
Another way we see Trump’s second term influencing housing is in the cost of building materials. The introduction of broad tariffs has raised the price of key construction materials like lumber and steel. These rising expenses threaten to slow new home construction and renovations. That could further tighten the supply and push home prices higher. If cost increases persist, developers may delay or cancel projects altogether.
Extending the Trump Tax Cuts
As of this writing, Trump is pushing to extend the 2017 tax cuts and potentially introduce new cuts. Lower taxes could make saving for a down payment or afford monthly mortgage payments easier. That could boost homeownership and drive demand in the housing market. However, if demand increases without a corresponding rise in housing supply, prices could climb even higher.
Immigration Policy and Labor Shortages
Trump’s immigration policies have been at the forefront of his presidency. Regardless of your opinion, there is a reality that these policies will impact construction labor. Immigrants make up a significant segment of the construction labor workforce. With stricter deportation policies and restrictions on work visas, there will be a labor shortage. That will affect labor costs in two ways. First, immigrant labor is typically more affordable. However, as the labor supply contracts, the wages of the remaining workforce will also increase. Furthermore, it may lead to project delays as developers have trouble finding the necessary skilled labor.
Potential for More Real Estate Investment
Trump’s trade policies and renewed tariffs have added volatility to the stock market. That has pushed some investors to seek safer, more stable investments. Some investors might see real estate as a hedge against market turbulence. As a result, real estate investment may grow in some markets. That is especially true in places with lighter regulations and attractive tax incentives. While this could lead to economic growth, it might have negative side effects for some buyers. Increased investment could reduce availability for homebuyers and drive up prices.
Trump’s Plans to Address Affordability
From the campaign through the early days of his second term, Trump has outlined plans to tackle housing affordability. One strategy he has repeatedly mentioned is deregulation. He wants to remove red tape, cut regulatory costs, and relax zoning laws. Trump has also pitched the idea of opening federal lands to development. He also signed an executive order directing federal agencies to create strategies for lowering housing costs. As of this writing, there has not been much to report on the progress of these policies. However, it is still early in his second term.
Are you planning to buy a home in Chicago? The MG Group is your expert guide to the local market. Contact us to learn more about how we can help you buy or sell a home in Chicago.
