CNN
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As President-elect Donald Trump prepares to take office this month, he faces a very different real estate market than he did during his first term.
The sharp decline in homeownership affordability over the past four years has stung many Americans – and Trump won his bid for the presidency of the United States. partly on the back dissatisfaction with the economy.
Now Trump, billionaire real estate developer himself, faces a housing dilemma: mortgage rates are not falling and real estate prices are expected to continue to rise over the next few years. Many economists believe that this year’s real estate market will be no different from the frozen real estate market of recent years. At the same time, many of Trump’s proposed policies, including tariffs and mass evictions, could potentially exacerbate America’s housing affordability problems.
The standard 30-year fixed mortgage rate, the most popular home loan option, was just below 2.8% when Trump left office in January 2021 during the pandemic. Last week, it was 6.91%. That means people who borrow money to buy a home now have to pay hundreds or even thousands of dollars more per month than if they had purchased a home at the same price four years ago.
House prices have also increased significantly since then. From January 2021 to October 2024, according to the latest available data, national home prices jumped 37%, according to the S&P CoreLogic Case-Shiller Home Price Index.
“I don’t really see why the housing market would improve this year,” said Jim Parrott, a nonresident fellow at the Urban Institute and former senior adviser to the National Economic Council.
Trump did not share an official ceremony political plan on the campaign trail to improve housing affordability, but in a statement, Taylor Rogers, a spokesperson for the Trump-Vance transition, said Trump would end the housing affordability crisis over the course of of his next term.
“President Trump will deliver on his promise to make housing affordable again by defeating historic inflation and lowering the mortgage rate,” Rogers said. “President Trump will ban mortgages to illegal immigrants that drive up housing prices, eliminate federal regulations that drive up housing costs, open up portions of federal lands with ultra-low taxes and regulations for building large-scale housing. The cost of new housing will be cut in half and President Trump will end the housing affordability crisis.
Trump has often talked about how regulations are adding to the costs of his real estate development projects. During his campaign, he promised to reduce regulations for home builders, which can increase the list price of a new home. A 2021 study of the National Association of Home Builders found that the regulations accounted for $93,870 of the typical final price of a new home. At the time, the average home price was $394,300. In November, it was $484,000, according to the U.S. Census Bureau.
However, many of these regulations are the result of local laws, which Trump promised not to interfere with during his first term. In a Opinion article 2020 In the Wall Street Journal, Trump and then-Secretary of Housing and Urban Development Ben Carson pledged to “protect America’s suburbs,” supporting local single-family zoning laws, which critics say often prevent construction new affordable housing.
America’s housing problems are driven in part by years of chronic underbuilding after the 2008 housing crisis and the Federal Reserve’s recent interest rate hike campaign to tame a historic surge in housing. inflation. Many of Trump’s policy proposals risk making these problems worse.
“A lot of what Trump has said is going in the wrong direction, when it comes to housing prices,” Parrott said.
Parrott highlighted Trump’s support for mass deportations, which could hamper the construction of houses.
While an influx of immigrants can increase housing demand in areas where housing is already scarce, potentially increasing competition for housing, it also helps increase housing supply, given the outsized role of immigrants without papers in the construction industry in the United States.
Some of Trump’s other policy proposals also threaten to increase the cost of buying a home.
“The biggest factor in affordability is really mortgage rates,” said Lawrence Yun, chief economist at the National Association of Realtors. “If the mortgage rate went from 7% today to closer to 6% or less, that would make a big difference in affordability. »
Despite the Trump transition’s promise to cut rates, mortgage rates follow the movement of the 10-year Treasury, which depends, in part, on the perception of the future direction of inflation. Trump’s threat of widespread tariffs, which some economists warn against could revive inflationcan keep interest rates and, therefore, mortgage rates high.
Higher interest rates would also hurt homebuilders’ ability to speed up construction of new homes.
The first Trump administration tried – and failed – to privatize Fannie Mae and Freddie Macthe lending giants that guarantee 70% of American mortgages. If he were to renew that fight, it could also lead to higher mortgage rates, Yun said.
Working toward a solution to the U.S. housing crisis could prove to be a pressing issue for voters in the upcoming election, Jaret Seiberg, a financial policy analyst at Cowen, wrote in a note to clients this month. last.
“Our view is that the Republican Party will need to address entry-level housing inflation in order to win future elections,” Seiberg wrote. “We believe that front-end housing inflation opens the door for Democrats to perform better in the midterm elections and gives them an advantage in the 2028 presidential election. Republicans, in our view, appreciate this risk. This is why we are waiting for action.
However, NAR’s Yun believes some of the current pressures in the U.S. housing market may begin to ease on their own.
Homes are staying on the market longer, which means bigger price drops could soon be on the horizon — and home sales underway pink for the fourth consecutive month in December, according to NAR data. Many house hunters are beginning to accept that mortgage rates around 6% are likely to stay and have stopped delaying their home purchase plans.
“I think the low point in home sales has pretty much been reached in 2024,” Yun said. “More and more people will be able to buy and more and more people will come into the market to list their properties. I think there will be more movement in the real estate market this year.