New York billionaire Donald Trump, President-elect of the United States, made his early fortune in the real estate sector. Business analysts who have been covering Trump for decades often mention that his business acumen is not as keen as that of his late father, Fred Trump; nonetheless, his business holdings clearly indicate that the President-elect is a firm believer in the economic power of the American housing market.
As can be expected, real estate analysts are hopeful that Trump's business background will boost the housing sector significantly. Despite concerns regarding his cabinet pick for the top post at the Department of Housing and Urban Development (HUD), it is worth pointing out that Trump believes that HUD should go through a process of reform that cuts down on bureaucracy.
The question of how the housing market will react in 2017 and beyond can be approached in different ways:
Positive Economic Sentiment
The U.S. housing market is intrinsically tied to the global economy. On the night of the presidential election, the global markets tumbled momentarily before getting back to normal. Since that incredible night, the Dow Jones Industrial Average has come very close to closing at 20,000 points, the highest level in the history of Wall Street.
Fortune says, that based on economic sentiment alone, the financial markets seem to favor a Trump presidency, which means that the housing market is bound to react in a similar manner. In fact, the National Association of Home Builders announced that confidence among the residential construction sector is at a nine-year high.
Higher Mortgage Costs
Financial analysts who are constantly watching interest rates have been worried ever since Hillary Clinton lost the election to Donald Trump. The final meeting of the Federal Reserve resulted in a decision to raise interest rates. In fact, Fed Chair Janet Yellen has hinted at the possibility of rates increasing a couple of times in 2017.
If you are planning on buying a home or on refinancing your existing mortgage, you should be ready to pay more for your financing costs during a Trump administration. Janet Yellen's statements in late 2017 were very clear insofar as her intention of cooling down market volatility with higher rates. She has made allusions to the fiscal package that Trump plans to introduce during his first 100 days in office; but according to The Atlantic, if the stimulus results in a Wall Street bonanza, Yellen will be ready to put out the fire of irrational exuberance with a bucketful of higher interest rates. Naturally, you will end up paying more as a mortgage borrower.
The Housing Market May Not be Affected After All
Some analysts are brushing off the idea of a Trump administration having a profound effect on the market. This rationale is based on the fact that the housing market should have reacted negatively to the shenanigans of the 2015-2016 political campaign. Nothing of the sort happened; this can be construed as the housing market operating independently from political sentiment.
As for other factors related to housing, insuring your home and paying your utilities should not be affected unless the U.S. enters a period of high inflation. There is somewhat of a chance that this may happen; after all, the Federal Reserve has been concerned that the economic recovery of the U.S. has largely occurred without a substantial increase of inflation rates.
The 10-year Treasury Yield has been inching up since the summer and thus, bond market analysts believed that this was a sure sign of inflation. They may have been right; the Fed would not have touched interest rates unless there was at least some hint of upcoming inflation. Oil prices are slightly on the rise, and wages are also growing. If Trump's economic policies are too generous and spendthrift, inflation rates could climb way up and this would impact the housing market negatively.
Everything seems to point out that the Fed will not allow inflation to grow out of control, and thus you can rest assured that the housing market will probably remain stable for the time being.