Newly elected President Donald Trump inherits a housing market that looks nothing like the one during his first term.
Affordability, as measured by average house prices and mortgage rates, has deteriorated significantly and is shaping consumer attitudes towards the economy as a whole.
Buying and selling activity has slowed dramatically as homeowners stay put to avoid giving up the low mortgage rates they secured before 2022. Existing home sales are on track to reach a nearly 30-year low by 2024.
The average 30-year fixed mortgage rate is over 7%, up from 4.09% at the start of its first term. A family that puts 20% down on a $400,000 home would now pay $594 more each month compared to early 2017.
Even finding a house for that price is becoming increasingly difficult. The average US home sells for $420,400, up 35% from just before Trump’s first term. Back then, the average home cost $310,900.
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The new Trump administration has promised to lower mortgage rates and home prices by implementing mass deportations of undocumented immigrants and relaxing federal regulations on construction and land use.
But economists and housing market experts say sweeping change isn’t that simple, and that some of Trump’s proposed policies, such as tariffs, risk worsening inflation and housing affordability.
“I don’t see how President Trump is going to lower rates, especially with higher rates, immigrant deportations and deficit-financed tax cuts,” said Mark Zandi, chief economist at Moody’s Analytics. “That’s all very inflationary.”
Supply chain disruptions caused by the pandemic have made many components of home construction more expensive, contributing to the rapid rise in home prices in recent years.
Trump’s promise to impose broad tariffs of 25% on imports from Canada and Mexico and another 10% on Chinese imports has many economists concerned that the problem will only get worse.
The National Association of Homebuilders, a trade group, estimates that by 2023, 7% — or $13 billion — of materials used in home construction would be imported. The industry is dependent on Canada for much of its wood, and on Mexico for lime and gypsum that is processed into plaster. and China for appliances.
Trump has said mass deportations will reduce demand for housing, freeing up more space for citizens.
While undocumented immigrants need their own place to live, economists say deportations ultimately risk further damaging housing supply because so many immigrants work in construction. According to the NAHB, almost a third of the construction workforce was born abroad. In California, where the housing crisis is particularly acute, immigrants make up 41% of the labor market.