Here’s how Trump will impact the housing market in 2025: a real estate agent’s perspective
It is not easy to predict what consequences a second presidency of Donald Trump will have for the housing market. While much of what is known is speculative, we can look at his past policies and campaign promises to get a better idea of what power to happen. For example, Trump has talked about lower mortgage rates, but to drop rates to 3% would require a severe economic downturn – something no one wants.
Through my more than two decades of experience in the real estate industry, I have seen firsthand how White House policies can impact affordability, lending, and inventory. Some of the new administration’s potential steps could help buyers, while others could create new hurdles. Let’s take a look at what his policies could mean for you as a home buyer or homeowner.
Can Trump’s policies help the housing market?
Here are some ways Trump’s policies could boost the housing market:
Lower taxes: Trump’s previous tax cuts under the 2017 Tax Cuts and Jobs Act provided more money to many American households, while raising taxes for others. However, it’s not that simple. If he extends or expands those cuts, it could help families save for a down payment. Changes to the SALT (state and local tax deduction) cap could also provide tax relief for homeowners in high-cost states. But smaller tax revenues for the U.S. government could increase the federal deficit.
Deregulation: Trump has a history of regulatory cuts, and we may see more of that in housing and lending. Less red tape could make it easier to qualify for a loan, but don’t expect changes overnight; these things take time to trickle down.
Fannie Mae and Freddie Mac reform: Trump has talked about privatizing these government-backed institutions. Proponents say this could make the mortgage market more competitive, but removing the government guarantee could also raise interest rates.
Investments in infrastructure: Improving infrastructure can create jobs, stimulate local economies and open new housing markets. However, this depends on how effectively these investments are implemented.
Could Trump’s policies hurt the housing market?
While some policies can help, others can make things more difficult:
Labor shortages due to deportations: Tougher immigration policies could reduce the construction workforce, leading to higher construction costs and slower development of new housing. Areas like Texas and Arizona, where new construction is booming, could be hardest hit.
Higher rates: If Trump imposes tariffs on imported building materials, such as drywall or lumber, the cost of building homes could rise. Builders are not likely to absorb these costs; they will pass them on to buyers.
Stronger growth equals higher rates: Trump is pro-business and pro-growth, but a stronger economy often means higher inflation. If that happens, the Federal Reserve may have to slow or stop interest rate cuts, keeping borrowing costs higher.
Will Trump force the Fed to change its rate-cutting plan?
The president does not control the Federal Reserve, but the economy does influence the central bank’s policy decisions. Mortgage rates are unlikely to drop significantly unless the economy slows down or we enter a recession – and no one wants that trade-off.
Fed Chairman Jerome Powell recently said that monetary policy depends on “the totality of incoming data.” If Trump’s policies stimulate economic growth and keep inflation high, the Fed may have to slow down rate cuts.
Read more: Are you still on the hunt for a 2% mortgage rate? This is why it’s time to let them go
Does a stronger economy make the situation better for homebuyers?
A stronger economy has pros and cons. On the one hand, higher wages and job growth can help buyers save for a home and qualify for a mortgage. On the other hand, strong demand can cause home prices to rise, especially if inventories are still tight.
This is where it gets tricky. A better economy can help your paycheck, but it can also make finding affordable housing even more difficult.
Read more: Mortgage Predictions for 2025: Low interest rates unlikely to return under Trump
Can you have lower taxes and lower interest rates at the same time?
The idea of lower taxes and lower interest rates sounds great, but is difficult to implement. Lower taxes often stimulate the economy, leading to inflation. When inflation rises, the Fed typically raises rates to cool the situation.
It’s a balancing act, and historically you can’t have both at the same time. So if taxes go down, don’t wait for mortgage rates to follow suit.
Read more: How the Federal Reserve influences mortgage rates
Should you buy a house in 2025?
The truth is that waiting for perfect market conditions doesn’t always pay off. If mortgage rates drop significantly, more buyers will step in, creating competition and raising prices.
If you’re in a good financial position – you have savings, solid credit and stability in your life – 2025 could be the right time to buy. Focus on what you can control, like your budget and finding the right home for your needs. Remember, it’s less about timing the market and more about timing your life.
