Residential Real Estate Outlook with a Trump Presidency on the Horizon
By Kimberly Wright, Esq.
A second Trump presidency will likely have significant implications for the residential real estate market in the United States, although it’s difficult to predict with certainty. The factors that influence the housing market are complex, and Trump’s policies as president would interact with broader economic conditions, interest rates, and global events. However, there are several key areas where a Trump administration could impact the residential real estate sector:
1. Tax Policy and Real Estate Investment
Lower Taxes on Income and Capital Gains: Trump has historically supported tax cuts, including reducing the corporate tax rate and capital gains taxes. If he enacts similar policies during a second term, it could increase after-tax income for individuals and investors, potentially leading to higher demand for residential real estate.
Deductions for Mortgage Interest: During his first term, Trump’s administration lowered the cap on mortgage interest deductions, which limited tax benefits for homeowners with high-value properties. A second term might bring additional changes to tax policy that could either benefit or hinder residential real estate buyers, depending on whether such tax breaks are expanded or reduced.
2. Regulation and Zoning
Deregulation: Trump has shown a preference for deregulation across many industries, including real estate. If this trend continues, it could lead to looser regulations around zoning, building codes, and environmental restrictions, potentially making it easier to develop new housing and increasing the housing supply. This could benefit homebuilders and developers, particularly in markets with housing shortages.
3. Interest Rates and the Federal Reserve
Pressure on the Fed: Trump has publicly pressured the Federal Reserve to keep interest rates low to stimulate economic growth. If he were re-elected, it’s possible he would continue advocating for low rates. Prolonged low interest rates tend to make mortgage financing more affordable, which can help fuel demand for housing. However, if the Fed reacts by raising rates to curb inflation or other economic factors, it could make mortgages more expensive, dampening homebuyer demand.
Market Volatility: Trump’s approach to trade, tariffs, and international relations may lead to market volatility, which can influence investor sentiment. In times of economic uncertainty, investors may turn to real estate as a safer investment, which could increase demand for residential properties, especially in more stable or desirable markets.
4. Housing Supply and Construction
Supply Chain Issues: Trump’s first term saw significant tariffs on materials like steel and lumber, which impacted the cost of construction. If a second term sees similar trade policies, construction costs could remain elevated, potentially leading to higher prices for new homes. This might especially affect first-time homebuyers and middle-class families.
Infrastructure Investment: Trump has expressed interest in investing in infrastructure projects. A significant boost to infrastructure could lead to more housing development and urban expansion, especially in areas near newly built highways, transit systems, or other infrastructure improvements.