President-elect Trump promises major policy changes when he returns to the White House. What do they mean for the housing market?
Important points:
Buyers can expect mortgage rates to be around 7%, home prices to rise and home sales to increase. Although sellers may see a slight increase in buyer demand and home sales, this year could be weak again. Renters may take a break. Rising house prices will encourage more people to rent, while flat rent growth and rising wages will make rentals more affordable. However, low-income households and those using government assistance are likely to find themselves in an even more difficult situation.
Donald Trump is scheduled to return to the White House on January 20 with plans to advance his policies with the support of a Republican-controlled Congress.
One of the most pressing issues facing him is the housing affordability crisis. This was a central issue in the run-up to the election and helped turn some voters, especially in unaffordable areas, into reverses. Many people have understandably been frustrated by rising costs and limited supply over the past four years.
So, to help navigate the next four years and beyond, let’s take a look at how President Trump’s second term in office could impact buyers, sellers, and renters.
>> Read more: Redfin’s 2025 Housing Market Forecast
What President Trump’s Presidency Means for Home Buyers
The president-elect promises big changes to the economy and housing market. Here’s what homebuyers could see over the next four years.
1. Mortgage interest rates are likely to remain unchanged
Buyers should expect mortgage rates to rise and remain volatile for some time. After the election, mortgage interest rates rose to around 7% in anticipation of President Trump’s policies, which are likely to continue until 2025. However, everything depends on President Trump’s decision.
President Trump plans to impose tariffs, cut taxes and eliminate inflation, all of which will affect mortgage rates. Mortgage interest rates and inflation are particularly closely related.
Experts fear tariffs could reignite inflation and slow global economic growth. Inflation has been steadily declining since its peak in 2022, but that could change direction if President Trump implements policy. Tax cuts will also increase the national debt unless offset by spending cuts. Investors are already pricing in expected changes in mortgage rates today, but if inflation rises more than expected, mortgage rates will likely follow suit.
President Trump has also promised lower interest rates, which will affect mortgage rates. But mortgage rates are largely out of his control because they are set by the bond market through investors.
Investors believe that if President Trump follows through on his policies and the economy remains strong, the Fed will only cut rates once in 2025. But if the economy worsens or plans for tariffs and tax cuts are scaled back, the Fed could cut rates further. Mortgage interest rates may fall. The housing market is generally unpredictable.
>> Economist learns more about mortgage interest rates
2. Housing prices may rise
Redfin expects home prices to continue rising through 2025 as there may not be enough inventory to meet demand. Prices have hovered near record highs in recent months, with record low affordability and very few sales. However, prices may fall in regions most affected by climate change.
President Trump has promised to lower housing costs by building more housing. He wants to encourage housing construction by loosening regulations, extending the 2017 tax cuts (TCJA) and freeing up federal land for development.
While regulatory relief would likely help improve supply, Redfin believes these proposals will not fully address the current affordability crisis for three reasons.
Local regulations, rather than federal regulations, govern much of the building process. The TCJA reduces tax benefits for homeownership, negatively impacting the economy and benefiting the highest income earners. Releasing federal land for development has only a modest effect on lowering prices, in part because most of the federal land is in the West.
3. Demand may return
Homebuyer demand was weak through much of this year, but picked up significantly before the election following two Fed interest rate cuts. And, contrary to expectations, it rose again after the election and into 2025, despite rising mortgage rates, soaring home prices, and an uncertain future.
Pending U.S. home sales are also gradually recovering, with Redfin’s Home Buyer Demand Index recently reaching its highest level since 2023. With demand expected to remain strong this year, now may be a good time to enter the market and stay ahead of the competition.
4. Housing supply may improve slightly
President Trump’s lifting of building regulations could improve supply, but new homes now cost an estimated $94,000 more. The National Association of Home Builders (NAHB) has expressed growing confidence that development could be easier under a Republican Congress. We need to see actual regulatory changes to prove this to be true.
The pace of new construction has slowed recently, but loosening regulations could provide some relief for the industry. Estimates suggest there is currently a shortfall of 2 million to 5 million homes for sale, which is driving up prices.
But Chen Zhao, a senior economist at Redfin, said that apart from deregulating the industry, President Trump’s immigration policies, particularly his calls to limit border crossings and possibly start mass deportations, will reduce the construction workforce. , believes that the price of home construction could become higher. About one-third of construction workers in the United States are immigrants, and nearly 14% are undocumented. His plan to build housing on federal land may help, but it is controversial.
What President Trump’s inauguration means for home sellers
Home sellers may see a slight increase in home sales, but many are uncertain. Here’s what sellers could face under the Trump administration:
1. Home sales may increase, but may remain historically low
Home sellers could see more home sales, but not much improvement as the market grapples with President Trump’s policies and the affordability crisis. The exception is in the case of affordable housing, where older buyers are able to price out the higher end of the market and snap up homes they can afford.
2024 was a historically low year for home sales, and the industry felt “frozen.” Redfin now expects Trump’s re-election to lead to a slight improvement in home sales. Sales increased in October and remained strong in November. If the economy remains strong and mortgage interest rates fall more than expected, sales are likely to improve further in 2025.
President Trump plans to improve affordability and increase housing stock by reducing regulations and building on federal land. But his promises on tariffs and deportations could have a hugely disruptive effect on the economy, undoing gains made elsewhere.
2. Sellers can see more demand
Buyer demand may reverse direction and improve. Home buying activity spiked immediately after the election. Additionally, the Fed ended 2024 with three straight months of rate cuts, but only one rate cut is expected this year. Mortgage rates aren’t expected to fall significantly any time soon, so many buyers don’t feel there’s much reason to wait. Only time will tell whether the recent spike in demand is a sign of a long-term trend.
But some experts believe housing affordability could decline under President Trump’s administration. Depending on the outcome of the proposed tariffs, deportations, and tax cuts, the housing market could be adversely affected and demand would be adversely affected.
3. Home prices are likely to continue rising
With severe inventory shortages and pent-up buyer demand, home prices will likely continue their steady rise into the new year. Redfin expects prices to rise 4% in 2025.
President Trump’s proposed solution of building more housing and lowering prices is unlikely to improve the situation. In fact, if he deports immigrants and imposes tariffs, it could slow construction and increase inflation. However, the prospect of less regulation is providing optimism for home builders.
Even if mortgage rates eventually fall, more buyers will likely enter the market, which will drive prices higher. Due to increased housing construction, it will take several years for housing to become significantly more affordable.
What does President Trump’s inauguration mean for renters?
Donald Trump has provided few details about how he will help renters. However, there are some hypotheses.
1. Rental affordability could improve
As new properties continue to come onto the market, renters can expect rent stability through 2025. Add the wage increase to the flat rent and you get a more affordable rent.
Although multifamily construction has declined, affordability could further improve under the new administration. President Trump’s plan to deregulate the industry and eliminate permitting requirements could increase supply. Supply and demand are the main drivers of rental prices.
As a result, the proportion of renters who bear a large cost burden may also decrease. Currently, more than half of all renters are rent-burdened, and most low-income renters cannot afford a one-bedroom unit.
But President Trump’s pledge to not only ease regulations but also impose tariffs and deport immigrants is likely to have a negative impact on the rental market. Tariffs could increase construction costs and slow new construction (supply), which would be passed on to consumers in the form of higher rents. Deportation of immigrants will hurt the construction industry.
2. Government aid may be cut
Low-income renters, especially those who rely on government housing assistance, are likely to be hit hard. President Trump has previously called for defunding housing assistance that would raise rents for the most vulnerable people.
Low-income housing advocates fear the new administration will once again seek to cut funding to affordable housing programs. In particular, the Department of Housing and Urban Development (HUD) is expected to see its budget cut. This would place a burden on cities and states that would almost certainly not be able to sustain their current funding. Some groups are excited about moving housing programs to states and cutting federal spending. Some are concerned about how their programs will be affected.
Nevertheless, several local affordable housing promotion bills have recently been passed, indicating that there is support at the community level to sustain the program.
People who rely on Supplemental Security Income (SSI), earn minimum wage, or live in poverty generally cannot afford housing and rely on government assistance programs, many of which are provided by HUD. has been done. Without funding, these programs cannot serve an already overwhelming number of people. Housing Choice Vouchers (Section 8), Community Development Block Grants, and public housing are most likely to be affected.
final thoughts
President Donald Trump’s second term promises to bring a lot of changes to the housing market. His proposals to ease regulations and free up federal land for new development could help improve supply and affordability. On the other hand, imposing tariffs and deporting immigrants would affect inflation, housing prices, and housing supply.
A lot could change over the next four years. If you’re considering housing, renting, or selling, it’s especially important to stay informed, talk to your agent and landlord, and never lose sight of your home search.
