Four ways how President Trump will impact the Boston condo for sale market

Boston Condos for Sale and Apartment Rentals

Four ways how President Trump will impact the Boston condo for sale market

The Boston condo for sale market has been a roller coaster over the last four years. Condominium prices surged during the pandemic, followed shortly after by rents, then interest rates soared and stamped down the growth of both.

The last two years has seen a homeowner lock-in effect,” with nearly 90% of homeowners last year enjoying mortgage rates under 6%, according to Redfin — and loathe to trade them in for a higher rate.

Regulation on Construction and Housing

We have a housing shortage across America, creating affordability issues. The median home price is around 5.2 times the median household income. This ratio indicates housing affordability remains a significant concern.

I also see more construction and housing supply on the horizon for Boston if we can ease up on housing building regulations

President elect Trump seems intent on increasing supply by loosening building regulations and aiming to encourage more private developers to step in. By loosening these regulations, it could be easier, faster and potentially cheaper for private developers to build new Boston condos throughout the city of Boston.

Tax Policies and Deductions

With Republicans sweeping both houses of Congress, pundits expect Trump to succeed in extending the tax rules from his signature Tax Cuts and Jobs Act (TCJA) of 2017.

The changes include doubling the standard deduction and capping state and local tax (SALT) deductions. The changes mean fewer Americans itemize their deductions, and it reduces the tax breaks for high-income homeowners who pay hefty property tax bills. That in turn leaves middle-income families with lower net tax rates — and more money to put toward buying a home. Of course, that itself puts upward pressure on home prices.

Another tax rule – Congress will almost most certain to be extended is bonus depreciation. It lets apartment developers and investors deduct more depreciation in the first year of ownership, further incentivizing new development of rental units. It also incentivizes investors to buy dilapidated apartment buildings and improve them.

“We will likely see tax incentives boost residential real estate markets nationwide, particularly in inner cities where Trump has voiced an interest in revitalizing,” said entrepreneur Brenda Christensen, who worked in commercial real estate herself.

Impact of Immigration and Economic Policies

Trump’s tendency toward deregulation will further lower the barriers to entry in the housing market by lowering building costs. That should improve affordability here in Boston

While many analysts predict an increase in housing supply, mortgage lender Jaye Hohman of Hohman Finance also sees downward pressure on prices and rents from the demand side of the equation.

“Most estimates of the number of [immigrants living in the U.S. illegally] in the U.S. are above 10 million,” he said. “Under Trump’s proposed mass deportations, there will be a significant decrease in total demand for both apartments and homes. Weaker demand implies a softening or fall in rents and home prices.”

Mortgage Rates

Hohman predicts higher mortgage rates to further depress home prices.

“Pro-business policies are good for the stock market, and when stocks go up, bonds traditionally fall. Lower bond prices mean higher yields, which drive up mortgage rates,” he said.
“So, it is likely in the near-term that mortgage rates will continue to rise, putting negative pressure on home prices. I expect home prices will fall dramatically in 2025.”

Stauffer also hones in on mortgage rates.

“Ideally, we’d need rates around 4% to ease the ‘lock-in’ effect we’re seeing,” she noted. “Lowering rates would boost buying and selling activity which would make a huge difference in the market.
“That said, I don’t see a major drop in interest rates coming in 2025 unless there’s a significant economic shift. People may need to accept that rates could stay where they are for a while.”

The prospect of dipping home prices and rents in 2025 could fill you with either hope or dread — depending on which side of the transaction you find yourself. First-time homebuyers and renters would welcome more affordability, while homeowners and investors would lose money.

Not everyone foresees softening home prices or rents. Goldman Sachs forecasts 4.4% appreciation in home values next year. The proverbial grain of salt: they made that prediction before knowing the outcome of the election.

President-elect Trump is notoriously unpredictable however, so all forecasts remain speculative as we approach a new year and new presidential term.