Will Trump Running for President in 2024 Make Real Estate Great Again?
Former president Donald Trump announced on November 15th, 2022, that he will once again seek the presidency in the 2024 election. Trump’s announcement was no surprise as he’s been hinting at a second run since President Biden took office. While it’s not clear if Trump will be the official nominee for the Republican party, his announcement is making waves across various industries. Every real estate investor is asking, “How will Trump’s run for the White House impact the real estate market?”
Read on to learn more about the potential consequences of Trump’s bid for reelection.
Economists can’t agree if home prices will continue their delayed decline or if the housing market will simply crash.
The Current State of the Market
It seems like the real estate market is in constant flux, but there are signs that things are starting to cool down. It feels like a lifetime ago that the market in areas like Florida, Texas, and California were so competitive that buyers were fighting over listings before they hit the MLS. A combination of ultra-low interest rates, a global pandemic, and a surge in housing demands led to the highest prices ever recorded. Investors who took advantage and improved their portfolios exponentially through purchases, profitable flips, and rising rental income.
Of course, what goes up must come down, even if the descent takes a while. Mortgage rates have more than doubled in the last two years, finally relieving pressure on the market. Economists can’t agree if home prices will continue their delayed decline or if the housing market will simply crash.
In October of this year, the median existing home sale price was $379,100, up 6.6% from a year ago but down from June’s record high of $413,800. Even with the drop in median prices, existing-home sales dropped 5.9% from September to October, which marks the ninth consecutive month of fewer sales.
What we do know is that the housing market is limited. Many homebuyers and investors took advantage of low-interest rates to get into new homes. Since those rates are unlikely to come back anytime soon, those homeowners will stay put. Even with the race to build new houses across the country, the limited housing supply won’t let prices drop too quickly.
Economists and real estate investors are watching interest rates as the primary indicator of what will happen next, but that doesn’t mean the world of politics won’t have an impact as well.
It’s unknown how the housing market will play in the 2024 presidential election, mainly because it’s unclear how the market will look at that time.
How Elections Can Impact the Market
Even though the 2022 midterm elections took place over a month ago, it’s still unclear who will control congress. From run-off elections, court cases, and drama in selecting house leadership, there’s a lot of room for change before the new congress takes over in January. The GOP will likely control the House of Representatives, which will have some effect on the market.
For example, Janet Seiberg, a financial service and housing policy analyst, believes that a republican-led House will result in the end of the current first-time buyer tax credit. This credit gives up to $15,000 in tax credits to first-time homebuyers. We’re also likely to see a failure in passing the current rehab housing package that would put billions of dollars into building, renovating, and buying affordable public housing.
Falling housing prices tend not to bode well for incumbent presidents. For example, when President George H. W. Bush decisively won the 1988 election, the housing market saw a 14% increase for 20 consecutive months before Americans cast their votes. By 1990, however, house prices stopped increasing at a national level, just before the 1990 recession took hold of the economy. Nationally, house prices fell 11%. Bigger cities, like New York and Los Angeles, saw up to a 24% drop in housing prices. President Bush handily lost the 1992 election to Bill Clinton, who campaigned on the housing market changes. Many believe that if the housing market had been more stable before the 1992 election, Bush would have easily won a second term.
The difference between the modern housing market and the one during Bush Sr.’s time in office means the results may not be the same. Even though housing prices were far from their highest points during the 2020 election, the market was surging. Based on the past, these increases should have helped Trump retain his place as Commander in Chief.
On that same note, housing prices and the number of home purchases started to fall before the 2022 midterms, which would typically mean that incumbents would have difficulty keeping their seats. Many political scientists predicted that Democrat incumbents in the house were in trouble. Of the 36 vulnerable Democratic incumbents, only six members lost their seats.
It’s unknown how the housing market will play in the 2024 presidential election, mainly because it’s unclear how the market will look at that time. House prices will likely continue to fall before the 2024 election, which could make it difficult for the current administration to stay in control.
During Trump’s presidency, the former president tried to bolster the U.S. economy through various tax cuts and lower interest rates.
Trump’s Campaign and the Real Estate Market
There’s no way to say precisely what will happen during Trump’s presidential campaign, let alone how a second term will impact the market. However, there is plenty of speculation about what putting Trump back in charge could do.
One of Trump’s original campaign points and defining elements of his presidency dealt with slowing immigration and deporting undocumented immigrants. Foreign and immigrant investments are a critical part of the luxury real estate market in the U.S. Based on a study by the National Association of Realtors, international buyers tend to buy more expensive properties. For example, international buyers spent $102.6 billion on residential real estate between April 2015 and March 2016. Global investors also made up about 15% of new construction projects in New York over the last few years.
Some worry that curbing immigration could reduce foreign investments, which would increase construction costs. The added costs could be passed on to homebuyers or cause builders to reduce the number of projects they attempt to complete. According to the American Action Forum, deporting the estimated 11.2 million undocumented immigrants would decrease our real GDP by $1.6 trillion. Anytime there is a decline in economic activity, real estate prices risk dropping.
During Trump’s presidency, the former president tried to bolster the U.S. economy through various tax cuts and lower interest rates. For example, Trump pushed for the 2017 Tax Cuts and Job Act that reduced income tax on wealthy Americans, which is expected to add $1.5 trillion to the country’s debt.
With the potential for an upcoming recession, the GOP will have plenty of fodder for a campaign focused on the economy. During Trump’s time in office, the average rate of inflation was only 1.9%, which is shadowed by the current 7.7% rate. It might be tempting for Trump to push similar policies, lower taxes, and drop the interest rates again to jump-start the economy, but doing so could push the country further into inflation.
After a few years of a red-hot market, investors are seeing interest rates go up and housing prices go down. This combination is deadly for current politicians, which puts the GOP in a perfect place to take back the white house in 2024.
A Divided GOP
The Republican party has reached an exciting place in its history. While Trump is still considered the party’s leader, many blame him for the poor turnout of the midterm elections. Many worry that the party’s disruption could negatively impact the market.
According to Shane Oliver, the head of investment strategy at AMP, “[Trump’s] decision to run may accentuate the divisions among Republicans, with many blaming him for the poor midterm election showing. These divisions may even lessen the chance of a more market-friendly Republican administration gaining the presidency in 2024, so some investors may actually see it as a negative for markets.”
Trump loyalists may be disenfranchised if the official GOP nomination goes to other potential candidates, like Florida’s Ron DeSantis. That kind of divide could cost Republicans the presidency at a time when the incumbent president will have a hard time keeping office.
The Future of the Real Estate Market
It’s a long road to the white house for Trump or any other candidate, including our current president. After a few years of a red-hot market, investors are seeing interest rates go up and housing prices go down. This combination is deadly for current politicians, which puts the GOP in a perfect place to take back the white house in 2024.
It’s unclear if Trump’s reelection bid will have any noticeable impacts on the market immediately. The first step is to see if he becomes the official candidate for his party or if any of his current legal troubles get in the way of his campaign. The second thing to watch is where the real estate market lands during the bulk of the campaign (2023 and 2024). The final thing to pay attention to is what kinds of policies and changes he proposes to avoid inflation and move the economy forward.
It’s too early to know precisely what will happen, but real estate investors are watching closely to see which way things will go.