Now that Donald Trump will become the 45th U.S. President, many people wonder how his various economic policies will affect certain industries. Perhaps none are more curious about Mr. Trump than those involved in the real estate industry, since his background in the industry could mean major changes in lending practices, mortgage rates, construction, and more.
With financial regulations expected to be eased during a Trump presidency, it’s inevitable there will be significant changes to the Dodd-Frank financial regulations. One change expected to take place soon is the lifting of compliance costs imposed on small-sized banks, which will allow the banks to make more loans for home building and other construction. As a result, this should ease the current housing shortage situation.
Less Stringent Mortgage Underwriting
In recent years, lenders have been reluctant to offer mortgages to home buyers due to stringent regulations as well as the possibility of being sued for infractions. However, with regulations decreased and lenders being subject to fewer and fewer restrictions, more mortgages will be offered to consumers.
Lower Building Costs
While housing prices have increased, the future holds promise for lower building costs. With less emphasis expected to be placed on regulations involving land-use and zoning, prices of newly constructed homes should drop to levels near those of existing homes. As a result, home builders expect the cost of lumber, cement, and worker wages to have far less impact on how much consumers will need to pay to purchase a home.
The Demise of Freddie Mac and Fannie Mae?
Having made terrible business decisions that resulted in a taxpayer bailout, Freddie Mac and Fannie Mae have stabilized to the point of the bailout being paid in full. However, even with recent success, many experts see the demise of Freddie Mac and Fannie Mae on the horizon. If this happens, home buyers seeking mortgages can expect to pay more due to 30-year fixed-rate mortgages disappearing as an option. If this happens, some experts worry about another financial crisis looming, since more and more mortgages would have little if any government protection.
While it remains to be seen what will happen once Donald Trump assumes the Presidency, financial experts have little doubt major changes to the real estate market are ahead. Whether it’s higher mortgage rates or banks having the ability to make more loans, consumers should factor these changes into their home search.
Elie Hirschfeld is NY real estate developer.