The incoming Trump administration faces a housing market starkly different from his first term, marked by soaring mortgage rates, limited affordability, and an economic strain for millions of Americans. With home prices up by 35% since his first inauguration and mortgage rates now exceeding 7%, tackling these challenges will require more than campaign promises.
As housing affordability deteriorates, the ripple effects are impacting the economy. Existing home sales have hit near-record lows, and economic policies proposed by the administration risk exacerbating the crisis rather than resolving it. Experts suggest the road ahead for housing is fraught with complexity.
Affordability Crisis: A Changing Landscape for Homeowners and Buyers
Buyers now face a difficult climate due to the combination of rising home prices and skyrocketing mortgage rates. Prior to Trump’s first term, the median home price in the US was $310,900; it is currently $420,400. In the meantime, the average 30-year fixed mortgage rate increased from 4.09% in 2017 to almost 7%.
Due of this disparity in affordability, buyers must spend significantly more each month. For instance, compared to six years ago, a family paying a 20% down payment on a $400,000 home pays an additional $594 each month. Due to their reluctance to sell, current homeowners who benefited from low-rate mortgages prior to 2022 further reduce inventory.
Experts caution that Trump’s proposed policies, such as mass deportations of undocumented immigrants and easing building regulations, may have unintended consequences. Deportations could harm housing supply by shrinking the construction labor force, where immigrants make up nearly 30% of workers nationally and over 40% in California.
The Challenge of Structural Changes: Tariffs, Supply Chains, and Mortgage Reform
The housing market is now more unpredictable as a result of Trump‘s intensified emphasis on trade policies and tariffs. The cost of building supplies may rise as a result of proposed tariffs, which include a 10% duty on Chinese goods and a 25% levy on imports from Canada and Mexico. Tariffs are a major problem since, according to the National Association of Homebuilders (NAHB), 7% of residential construction supplies, worth at $13 billion yearly, are imported.
Another level of intricacy is added by the possible removal of Freddie Mac and Fannie Mae from federal conservatorship. Even though these organizations have kept the mortgage market stable since the 2008 financial crisis, the $12 trillion mortgage business might be disrupted if they are removed from government regulation. Lenders and consumers may be impacted by increased borrowing costs in the absence of federal guarantees.
While the administration has pledged to address these issues, experts remain skeptical. “On all three counts — materials, labor, and capital — there is substantial risk for cost increases,” notes Stijn Van Nieuwerburgh, a Columbia University professor. Trump’s housing policies will likely face significant challenges as his administration navigates a market defined by high costs, limited supply, and economic uncertainty.
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