How will President Trump Impact the Boston Condo for Sale Market?
Boston Condos for Sale and Apartments for Rent
How will President Trump Impact the Boston Condo for Sale Market?
Realtor.com, owned by News Corporation, has thoughts on how Trump will affect the real estate market:
On the campaign trail, Trump had blamed rising home prices on a surge of illegal immigration during the Biden administration. He also claimed that he would somehow lower mortgage rates if elected, although presidents do not control mortgage rates.
Here’s a look at some of Trump’s signature policy proposals, and what impact they might have on the housing market.
Mass deportation of immigrants
Trump and his running mate, J.D. Vance, have repeatedly claimed that illegal immigration is responsible for America’s housing affordability crisis, by putting immigrants in competition with citizens for scarce housing units.
Trump has promised to carry out “the largest deportation operation in American history” and argues that this will ease housing prices by reducing demand.
In reality, the evidence that immigration is a major factor in housing costs is mixed. While there is reason to believe that higher immigration levels can drive up local rents in a city, the recent post-pandemic surge in home prices began before illegal immigration levels jumped.
Realtor.com® senior economist Ralph McLaughlin says that the kind of massive immigration crackdown that Trump proposes would have “large and negative consequences on the U.S. housing market in both the short and long run.”
“In the short run, reducing immigration could severely hurt the labor supply needed for new homebuilding since up to a third of residential construction employment consists of foreign-born workers,” he says.
McLaughlin adds that, in the long term, extreme immigration restrictions could have “spill-over effects to the broader economy.”
LendingTree senior economist Jacob Channel agrees, writing that mass deportations would not solve the fundamental issues with the housing market.
“While fewer immigrants could free up some housing for those who remain in the U.S., the economic fallout from mass deportations would be catastrophic for the nation’s broader economy,” says Channel.
Cut regulations and open up federal land for building
Trump has called for slashing regulations and permit requirements that homebuilders say add unnecessary costs to new homes.
“We will eliminate regulations that drive up housing costs with the goal of cutting the cost of a new home in half. We think we can do that. The regulations alone cost 30%. Regulation costs 30% of a new home,” Trump claimed in a September speech at the Economic Club of New York.
However, those figures appear to be dramatically overblown. The National Association of Home Builders, a longstanding industry critic of regulations, estimates that site work and related permit fees account for 7.4% of the average new-home cost, with overhead and general expenses accounting for an additional 5.1%.
Many economists agree that streamlining and eliminating regulations would help boost home construction and reduce costs, though it’s difficult to imagine achieving the extent of price relief that Trump envisions.
“Fewer regulations and more available space on which to build may reduce homebuilding costs and help increase the housing supply,” says Channel. “That said, limiting regulations won’t be enough to cut prices in half, and ending some isn’t a cure-all for the problems plaguing the nation’s housing market.”
In a statement, NAHB Chairman Carl Harris congratulated Trump on his election win.
“Throughout the campaign, voters consistently pointed to the lack of housing availability and affordability as a key issue in their voting decisions. Now is the time to take action to address the nation’s housing shortage and let builders build,” he said
Trump has also said he would open up portions of federal land for large-scale housing construction.
“These zones will be ultralow tax and ultralow regulation. One of the great, really small-business job creation programs it will be of all time. We’re going to open up our country to building homes inexpensively so young people and other people can buy homes,” Trump said at the September event.
This is one point that Trump and his opponent agreed on, with Harris also calling for some federal land to be used for housing, and the Biden administration selling some public land near Las Vegas for that purpose.
Economists also generally support the idea as one way to boost new home construction. However, one limitation of the plan is that in many cases, there is no significant federal land located near the places where people want to work and live.
Nationwide, the federal government owns about 27% of the total land area, but much of that land is located in the Western U.S. In other regions of the country, there may be little federal land to set aside for housing construction.
Pressure Fed to lower interest rates
Finally, Trump has also claimed that he would somehow lower mortgage rates, although there is no clear mechanism for the president to do so.
“Reducing mortgage rates is a big factor. We’re going to get them back down to, we think, 3%, maybe even lower than that, saving the average homebuyer thousands of dollars per year,” Trump said in New York.
Mortgage rates have risen for the past four consecutive weeks, hitting 6.72% last week.
“The president doesn’t set mortgage rates. If elected, Trump probably wouldn’t be able to arbitrarily decide to lower them even if he wanted to,” says Channel.
Trump has previously shared his belief that the Federal Reserve should take orders from the president, instead of independently setting monetary policy as it currently does.
But even the Fed does not directly control mortgage rates, which follow the underlying bond market and move in response to investor expectations about the economy, inflation, and future fiscal and monetary policy.
The Fed began cutting its benchmark rate in September, but mortgage rates have climbed steadily since then, due mostly to investor fears that a Republican sweep of the White House and Congress could increase deficit spending.
Yields on the 10-year Treasury jumped to 4.44% on Wednesday morning, up from 4.3% a day earlier, suggesting mortgage rates will continue to rise in the short term.
“Investors are taking Trump at his word and believe if he wins, it will lead to higher tariffs, immigrant deportations, and deficit-financed tax cuts in a full employment economy, all of which means higher inflation and more government borrowing,” Mark Zandi, chief economist of Moody’s Analytics, said on X last week.
“The recent surge in mortgage rates is a clear indication what investors believe a Trump victory would mean for the economy and the nation’s fiscal outlook,” he added.
Trump unlikely to solve the housing crisis, experts say
Most economists agree that a dire shortage of homes is the root cause of the nation’s housing affordability crisis.
“Housing supply, or lack thereof, has plagued the U.S. housing market for at least a decade, with our estimate of a range of 2.5 million to 7.2 million unit gap from 2012 to 2023, depending on the assumptions of the analysis,” says McLaughlin. “Due to a combination of both geographic and legal constraints on development, we simply haven’t built enough housing when, and where, we needed it most.”
Although Trump’s proposals to cut red tape and regulations for homebuilders could help boost construction on the margins, housing economists warn other of his proposals could hamper supply.
“Simply put, what little Trump and his campaign have stated about his housing policies doesn’t stand up to scrutiny,” wrote Channel. “Not only are his proposals incredibly vague, but enacting them would likely be difficult. What’s more, many of his proposals, such as mass deportations and implementing large tariffs, are likely to cause more problems than they solve.”
As well, the housing crisis in America is more than a decade in the making. Construction plunged following the Great Recession and hasn’t yet fully recovered, leaving the nation in a deep hole of undersupply. Quick and easy fixes are unlikely to emerge.
“Both the Republicans and the Democrats will have proposals that will sound good on paper, but do very little to change the housing shortage, unfortunately,” says Ken Johnson, a professor of finance and the Walker Chair of Real Estate at the University of Mississippi.
“As a real estate economist, I’m just here to tell you that both parties have not done a good job with the housing market over the last decade or so.”
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