Expecting a 'Trump bump' in housing? Not so fast

Those expecting a "Trump bump" in housing and real estate from the likely loosening of regulations governing the market might find things won't move as far as they hope, Realtor.com said.

While a second Trump administration will be able to quickly implement some regulatory changes, others that impact housing such as tax changes and broad deregulation require the cooperation of other branches of government. That includes a Congress in which his party holds control of both chambers, but with a very narrow majority in the House of Representatives.

"The size and direction of a Trump bump will depend on what campaign proposals ultimately become policy and when," Danielle Hale, chief economist at Realtor.com, said in a press release. "For now, we expect a gradual improvement in housing market dynamics powered by broader economic factors. The new administration's policies have the potential to enhance or hamper the housing recovery, and the details will matter."

When it comes to homebuilding, both Realtor.com and a separate outlook from Redfin believe that a Trump administration would loosen the regulatory environment, boosting activity.

But Redfin said any boost could be countered by immigration policies. Immigrants make up 30% of the country's home construction workforce.

The two forecasts vary a bit on rates. Realtor.com expects a full-year average of 6.3%, and a drop to 6.2% by year-end.

Redfin is about 50 basis points higher on its estimates, at a 6.8% average for the year. That is where rates are today, with the Nov. 27 Freddie Mac Primary Mortgage Market Survey putting the 30-year fixed at 6.81%. Sam Khater, Freddie Mac's chief economist, attributed investors' desire for clarity for mortgage rates remaining at that level.

"Investors are anticipating that if President-elect Donald Trump implements a significant portion of his proposed tax cuts and tariffs, and the economy stays strong, the Fed will only cut its policy rate twice in 2025, keeping mortgage rates high," Redfin said in its release. "Tariffs could be inflationary, and enacting more tax cuts would increase the U.S. deficit, both of which would push mortgage rates up."

But in a caveat, Redfin said rates go down to the low 6% range if the U.S. economy falters or if President-elect Trump dials back his proposals on tax cuts and tariffs.

"Any year in which the presidential administration changes is unpredictable, and this one may be especially unpredictable," Redfin said.

Fannie Mae's November rate forecast is slightly above Realtor.com's, at an average of 6.4% for the full year, and 6.3% in the fourth quarter. The Mortgage Bankers Association expects 6.4% for the full year and the fourth quarter as well.

Redfin is also very bearish on Gen Z homeownership in 2025, saying while lower-priced home sales will boom next year, relative to their higher-priced counterparts, it won't be a result of younger or working-class people entering the market.

"Instead, affordable homes will be snapped up by older buyers who are priced out of higher price tiers," Redfin said. "Gen Zers, meanwhile, will keep living with family or renting until well into their 30s, opting to build wealth in other ways."

On the other hand, Boston Consulting Group expects Gen Z share of the mortgage market to grow through 2028 to 24% from the current 6%.

Realtor.com, however, expects a more balanced home purchase market next year, with some buyer-friendly conditions including more inventory and the likelihood of price cuts for 20% of listings.

Limited inventory, combined with strong demand in many areas could give sellers the upper hand when it comes to negotiating prices, especially in desirable locations.