With the recent announcement of Donald Trump’s plans for his 2024 presidential run, real estate professionals, homeowners, and potential buyers and sellers are all wondering how a Trump presidency might impact the U.S. housing market. Trump's previous term saw a mix of economic policies that affected everything from mortgage rates to housing demand. Now, as he enters the race with renewed political vigor, let’s break down the likely outcomes for the housing market and what homeowners, buyers, and investors need to know.

Background: Trump's Previous Impact on Real Estate

During Trump’s previous term, the housing market saw significant shifts influenced by his tax reforms, deregulation policies, and broader economic strategies. Trump’s administration, prioritizing economic growth, implemented tax policies that affected property ownership, especially in high-tax states, by capping state and local tax (SALT) deductions. This led to higher effective property tax bills for many homeowners in states like New York, New Jersey, and California, impacting their affordability and homeownership costs.

At the same time, Trump's regulatory policies encouraged economic growth, with a notable emphasis on corporate tax cuts and deregulation in sectors like banking and finance. This led to relatively low mortgage interest rates and made borrowing more affordable, which fueled demand in the housing market. However, the effects weren’t uniform, and regions throughout New York, including: Long Island, Queens, and Brooklyn were among those particularly impacted by the SALT cap, which limited tax deductions for residents in higher tax brackets.

Key Factors Likely to Impact the Housing Market in a New Trump Term

If Trump returns to office, the housing market will likely experience a new set of dynamics. Here are several anticipated areas where his policies could have an impact:

1. Mortgage Rates

In Trump’s last presidency, his administration supported a low-interest rate environment, which helped to keep mortgage rates low. This strategy aligns with Trump’s pro-business, growth-oriented approach, which aims to stimulate investment and spending. His return to presidency might advocate for a similar environment, aiming to keep mortgage rates low to encourage home buying and real estate investments.

However, with inflation concerns at the forefront, the Federal Reserve’s actions could be challenging to predict. Should inflation rates rise, mortgage rates might increase to combat inflationary pressures. Balancing these factors will be crucial for the Trump administration, and any effort to keep rates low could have a significant effect on housing affordability and demand.

2. Tax Policies

Trump’s approach to tax policy has traditionally leaned toward tax cuts and reductions in government spending. However, the cap on state and local tax deductions, introduced in 2017, significantly impacted homeowners in high-tax areas, which could again play a role in his potential administration’s approach.

The reintroduction or continuation of SALT cap deductions could influence demand in states like New York, where property taxes are notably high. Potential homebuyers in high-tax areas might face increased costs, which could impact their ability to afford homes in the region. Conversely, removing or lifting the SALT cap might provide relief to many homeowners in these areas, potentially increasing demand in the markets affected by the cap, such as Long Island, Queens, and Brooklyn.

3. Housing Supply and Affordability

Trump’s administration previously emphasized deregulation in various sectors, including construction and real estate development, which allowed for a slight boost in housing supply. For Trump, deregulation aligns with his pro-business stance, and it’s expected that he might pursue similar policies in a second term, pushing for more development to address housing supply issues. Increasing housing inventory could alleviate supply shortages, but achieving this may depend heavily on local regulations, as well as broader economic trends that drive developers to invest in new projects.

Supply has become a more pressing concern in recent years, particularly in dense, high-demand areas. Long Island, Queens, and Brooklyn could benefit from efforts to address these shortages. However, the complexity of zoning regulations in these areas means that it would require concerted efforts at both federal and state levels to have a substantial effect.

4. Economic Growth and Employment Rates

A key pillar of Trump’s policy approach has been economic growth, often characterized by lower corporate taxes and fewer regulations. By boosting employment and consumer confidence, this approach theoretically strengthens people’s ability to buy homes. However, the balance of stimulating growth while controlling inflation will be a critical challenge.

If the economy grows under a potential Trump administration, higher employment rates could lead to increased demand in the housing market, especially in metro areas. Demand increases may drive home prices upward, but affordable lending could counterbalance this effect. Job security and wage growth would also be pivotal in enabling homebuyers to enter and remain in the market, sustaining the demand for housing.

Possible Risks and Challenges for the Housing Market

While Trump’s pro-growth, low-tax policies could stimulate the economy, there are inherent risks. Inflation, particularly, would be a significant concern. If a Trump administration’s policies contribute to increased spending, it might also trigger inflation, leading to higher interest rates, which could subsequently impact affordability for homebuyers.

Additionally, deregulation efforts, while beneficial in some ways, could lead to increased housing market volatility. The effects of deregulation might be beneficial in the short term but could create unsustainable growth patterns if not managed carefully. Investors and homeowners in areas like Westchester would need to stay informed about local market conditions and adjust their strategies as needed.

Conclusion

Navigating the housing market in a politically dynamic period can be challenging. As a realtor specializing in Long Island, Queens, and Brooklyn, I am here to help you understand how these changes might impact you, whether you're buying, selling, or investing. With expertise in market trends and a commitment to providing personalized guidance, I can answer your questions or assist you with listings tailored to your needs. Feel free to reach out to me at [email protected] or explore my services at Charnat Homes.