Industry experts forecast economy and housing market under Trump
Whether you voted for him or not, the new President will affect many aspects of our lives, including housing and real estate. Read below what the experts predict (or can't predict).
PUBLISHED 6 DAYS AGO
Written By: CAROLINE FEENEY STAFF WRITER for Inman.com
What happens when the leader of the free world is a property industry tycoon for the first time in history?
While the financial market volatility in the immediate aftermath of Trump’s victory is being chalked up to some Brexit-like jitters, the President Elect’s lack of political history and policy plans leave much room for speculation.
The many moving parts of the U.S. housing market — mortgage rates, buyer and seller sentiment, home building and more — influence the strategies agents and brokers will deliver to clients on a grassroots level.
Here’s what industry experts had to say about the future now that it’s officially decided: One of real estate’s very own will soon occupy the prime location of 1600 Pennsylvania Avenue.
Misty crystal balls
Those scanning America’s economic horizons are seeing a lot of fog. As they flash their headlights for clues of what the future holds, the one thing that appears to be clear is that nothing’s quite clear yet.
Selma Hepp, chief economist at Pacific Union International, said: “The outcome of the election brings something to the equation that nobody likes, and that’s uncertainty. Consumers get wary and businesses get wary, and investors will be pricing the uncertainty into their decisions.
“Additionally, Trump has not offered a plan for the housing market other than rhetoric. In the least, we know his administration does not agree with the current state of the Dodd-Frank reform and will try to change that. But how it all plays out — it’s too early to tell.”
Russ Cofano, President and General Counsel of eXp World Holding, added: “I am not a housing economist and would not relish that job after the events of yesterday.
“There appears to be a lot of general consumer uncertainty as to what his election will mean, especially from his non-supporters, who believe his policies may cause them economic harm (for example, repeal of the Affordable Care Act).
“I believe a large part of the housing market is influenced by consumer confidence and this may offset the demand caused by continued low rates. Longer term, Trump did not say much directly on housing during his campaign so, hard to tell.
“If he is able to gain the confidence of the global markets based on actions taken in the coming months, I would expect positive things for the housing market.”
At the same time, Trulia’s Ralph McLaughlin made the case in a statement released this morning that uncertainty can actually equal stability: “A rocky road is no fun to tread on, but at least we know where the obstacles lay,” he said. “Uncertainty tends to drives investors towards safe bets, such as U.S. bonds, which pushes down mortgage rates and makes borrowing cheaper.”
The storm before the calm?
What’s to be done in times of uncertainty? Stay calm.
“First and foremost I would say that we should all take a deep breath,” Windermere’s Chief Economist Matthew Gardner told Inman.
Indeed, Americans glued to John King’s magic map last night weren’t the only ones who went to bed (and woke up in the morning) surprised. The shockwaves resonated around the world as the entire globe watched the United States’ wild politics unfold.
In a comparable push for drastic change (that appeared to be embedded in yesterday’s voters), the Brexit decision less than five months back caused a panic that we see mirrored in the aftershocks of this election. But it was temporary.
As swing state surprises rolled in last night, stocks were down, the Dow Jones industrial average dropped 4 percent (more than 700 points), and Futureson both the Nasdaq and Standard & Poor’s 500 dropped 5 percent.
“In a similar fashion to the UK’s ‘Brexit,’ there will be a ‘whiplash’ effect, as was seen in overnight trading across the globe,” Gardner noted. “However, at least in the U.S., equity markets have calmed as they start to take a closer look at what a Trump presidency will mean.”
He added: “On a macro level, I would start by stating that political rhetoric and hyperbole do not necessarily translate into policy. That is the most important message that I want to get across.
“I consider it highly unlikely that many of the statements regarding trade protectionism will actually go into effect. It will be very important for President Trump to tone down his platform on renegotiating trade agreements and imposing tariffs on China. I also deem it highly unlikely that a 1,000-mile wall will actually get built.”
In this murky zone, Trulia’s Ralph McLaughlin made note of a “rocky but predictable foreground.”
“This happened during Brexit as the world looked to a stable U.S. economy for safe harbor, but there’s an important difference between Brexit and a Trump victory: the U.S. economy now looks less safe because we don’t know Trump’s policies towards trade. This is actually pushed bond yields higher this morning as investors hold off on purchasing U.S. bonds.”
What comes after a shakeup? A mixed bag
John L. Heithaus, an advisor to a real estate buyer database and analytics company, has a pros and cons list after last night’s results, which he shared in a Facebook discussion on Inman Coast to Coast.
“It’s a conflicting ‘basket’ of pluses and minuses,” he said. “Rate rise has obvious impact (mostly psychological unless rates get past 6 to 7 percent), tax cuts can be bullish, more jobs is usually good for real estate.
“Foreign Direct Investment (FDI) could take a huge hit, uncertainty sucks for any financial marketplace, ‘rebuilding inner cities’ could mean more housing for all from homeless to aspirational renters.”
In the same conversation, agent Rich Shearrow described himself as extremely optimistic: there may be a very short period of reduced activity, he said, but we can expect the usual holiday lull and individual consumers’ financial positions will remain unchanged, along with interest rates.
He also mentioned Trump’s potential to make inner-city revitalization happen — because he understands how it can progress.
“I would foresee [the Department of Housing and Urban Development] (or a combination of agencies) taking on an enhanced role in addressing quality-housing deficiency,” Shearrow commented.
“Public resources will be sorely needed in the area of addiction treatment… as that is (in my opinion) the first step in restoring hope and optimism in the urban areas. I TRULY believe that THE biggest priority to get the country on the right track will be to address the untapped potential of the inner-cities. Unleash that potential, and I believe that the results will cascade exponentially.”
The million dollar mortgage rate question
Though historically low mortgage interest rates haven’t brought out buyers in hoards as one might expect (thanks to tight inventory and strong home prices), any change in that could have a ripple affect on housing.
An imminent Fed meeting always brings out the speculators, but with the Trump wild card, economists are weighing a couple of different scenarios.
Pacific Union’s Hepp says we may be looking at a faster increase in rates than we would have seen otherwise, as investors account for Trump’s potential volatility with extra cushion.
Realtor.com’s Jonathan Smoke noted that with five weeks before the Fed convenes, the market still has time to “digest the potential outcomes.”
“While the market is now indicating a reduced probability of a short-term rate hike at that meeting, the Fed has repeatedly indicated that they would be data-driven in their decision, he said in a statement. “Thus if markets calm down and November employment data look solid on December 2, a rate hike could still happen.”
ExP’s Cofano added: “In the short term, seems to me that the Fed will likely stay pat until they know how the election plays out on a more macro basis. So, that may be good for current buyers and refinancers.”
Where’s your head at, consumers?
High-level industry leaders have their take on the housing market, but equally important are those selling their biggest financial asset or making the biggest purchasing decision of their life.
McLaughlin of Trulia could see the polarization between traditionally Republican and Democratic states spilling over into home sales — with a Trump win acting as “both a boon and a drag” on buyer confidence.
“Homebuyers in economically healthy blue states will likely be rattled and more hesitant about the future the U.S. economy, which will curb their interest in making large investments,” he said.
“In economically stagnant red states, on the other hand, homebuyers will likely feel a surge of confidence that could bolster demand.”
Hepp expressed how a Trump presidency could impact young homebuyers specifically, “with so much emphasis on millennials who are expected to carry the market forward,” but indicated that buyer numbers overall should be in the housing market’s favor.
Concerned about the message millennials received, given that they predominantly voted for Hillary Clinton, she said: “as a result, we may see some stalling in the market activity. Nevertheless, when the dust settles, we are still looking at strong housing fundamentals with a sheer volume of young people becoming of age when they are thinking of homeownership and many of them being educated and earning solid incomes. As long as the employment stays on course, the housing market will flourish.”
Meanwhile, Redfin’s Chief Economist Nela Richardson made the case that housing is of universal interest — and we’ve got work to do when it comes to affordability, an issue that, though largely absent from the campaign, cuts across all voter segments.
“Where people live affects their job opportunities, the quality of the schools their kids attend, and in turn, the economic mobility and productivity of our country and its citizens,” she said. “As a country we need to enter a new chapter in housing policy, one that disrupts old ways of thinking and embraces a path of inclusionary growth and shared prosperity. America’s electorate requires nothing less.”
HomeUnion, a property investment solution provider, forecasts that Trump’s resilient success in real estate that defied a housing market cash and several bankruptcies could inspire more capital investment.
“Trump leveraged real estate laws to create and maintain a fortune. That investment vehicle is available to everyone, and is likely to attract more capital as investors envy Trump’s path to wealth,” the company said.
And what does the nation’s largest trade organization have to say about Trump’s win?
It appears that at least one housing stakeholder is ready to roll up its sleeves.
“NAR doesn’t get involved in presidential elections, but we congratulate the President-Elect on his victory. NAR looks forward to working with the new House, Senate, and presidential administration in support of homeownership.”