How will the election impact housing?

Believe it or not, Donald Trump is going to be our next president. How will his presidency influence the housing market? Needless to say, opinions vary widely...

Jonathan Smoke, chief economist at Realtor.com, optimistically points to Trump’s business background as an indicator of what could be in store for the housing market. 

“If you are rooting for the economy to improve, you would hope that his background as a business person, as a real estate developer, would pave the way for more growth, more development and that would be a net beneficial for real estate,” Smoke said.

But Trump’s lack of housing policy proposals leaves others anxious.

“The president-elect has basically made his campaign oriented around uncertainty,” said Ralph McLaughlin, chief economist at Trulia. “He laid out a very uncertain policy landscape, and that uncertainty is going to have short-term effects that are more predictable than the long-term ones.”

The biggest short-term effect was on the financial markets, which reacted poorly initially before quickly recovering. Volatility in the financial markets tends to cause investors to flee to safety, which lately has been mortgage-backed securities. That’s helping keep mortgage rates low — great news for those looking to refinance.

“I’m more concerned about what happens to interest rates,” Smoke said. “We appeared to be on a gradual but upward trajectory on interest rates. Is the widely expected December rate hike off the table for the Federal Reserve? 

Trump's impact on the housing market will also vary on where you live. Home buyers in economically healthy states are more likely to be rattled by the election outcome. They might put off making a large purchase such as a home, causing a drag on the market.

In contrast, home buyers in economically stagnant states are more apt to be optimistic about a Trump administration’s effect on their economic prospects, creating a surge in their confidence about the future and interest in making a big purchase such as a home.

Historically speaking, most changes in administrations have had little effect on the housing market. Stay tuned...