In the past, most changes in administrations usually have had little effect on the housing market. How this new administration could influence the nation’s housing market will become more clear in the coming months and after the transition of power. Here are some perspectives based on what we know so far:
What Is In Store For The Housing Market?
Last summer, Trump told a meeting of the National Association of Home Builders that the housing industry is overregulated. He explained that twenty-five percent of costs to build a house are building regulations. It is not just the building regulations Trump is concerned with, in fact, most of his platform has centered around deregulating the financial market in order to more fully revive it. Loosening regulations on lending could potentially increase homeownership by making it easier for people to get loans.
What Will Happen To Interest Rates?
The president does not have direct control over interest rates, however his politics and fiscal policy do. Experts believe that rates will bounce around for the first few months as markets adjust to the new president. However, interest rates have been inching upward of late and it looks like they will continue to do so in the future. Trump will have to make his policies and priorities more transparent or risk even higher rates from uncertainty in the market.
In the short term, mortgage servicers and lenders may profit from a surge of people rushing to refinance before rates get too high. One possible change for the market is that the Federal Reserve, which was likely to raise interest rates in December, could postpone a hike further into 2017 to see how the economy is going to react to a Trump administration.
What Will Happen To The Finance Industry?
Deregulation is a priority of Trump’s but so is growing the U.S. economy. There needs to be a happy balance between the two. You don’t want lenders to be reckless but you do want them to make sustainable long-term investments in the economy.
Perhaps the biggest issue for the housing finance industry is the future of Fannie Mae and Freddy Mac. The two agencies have been locked in conservatorship during the past eight years and many are calling on a complete overhaul. This could prove to be a daunting task and most likely will not be addressed until the later years of his first term. Only time will tell, but it appears as though Trump wants to do away with both of them. Not to mention that Trump’s transition team has recently indicated that it would like to see a full repeal of the Dodd-Frank Wall Street Reform and Consumer Protection Act – an act that provides more oversight of financial institutions in the aftermath of the housing bubble that burst the nation into recession.
Nobody has a crystal ball to look into the future of the real estate market, but it does not look like home buyer demand will be tapering off any time soon.