Expectations for the housing and real estate markets over the next four years reveal both optimism and caution as various economic and political dynamics come to play. Housing research executives are weighing the potential impacts of policy changes under the subsequent political administrations and how they might shape commercial and residential property sectors.
One prominent view from those observing the market is expressed by Gregg Logan, managing director of RCLCO, who notes the election's outcome is likely to have significant ramifications. Logan forecasts potential shifts with the reelection of Donald Trump, citing the former president’s business-oriented policies during his first term and asserting, "Trump’s potential influence on the real estate market is a mixed bag of potential influences.” He elaborates on how the earlier tax reforms had temporarily boosted economic growth but primarily benefited the wealthy and big corporations, leading to concerns about income inequality.
Logan stresses the duality of policy effects, elaborated by the potential for tax cuts and regulatory easing, but warns of the risk of increasing tariffs on imports, particularly from China. “Tariff-induced inflation may lead the Federal Reserve to raise interest rates, affecting home affordability,” he explains. The mixture of high construction costs and rising mortgages could complicate the development of affordable housing.
Palacios Jr., director of research at John Burns Research and Consulting, also notes how presidential policies could critically impact the availability and affordability of housing. He emphasizes the current shortfall, estimating the U.S. needs about 1.5 million more housing units to reach market balance. “Proposed changes to federal land use may increase supply, but they’ll face various regulatory challenges,” he adds.
The discussion around housing market pressures seamlessly intersects with the broader economic forecast for 2025. Freddie Mac's recent projections indicate expectations of declining mortgage rates supporting more home sales, albeit tempered by uncertainty surrounding interest rate adjustments and jobs growth forecasts. Their economics team cited jobs stabilization as key, hinting this contributes will bolster purchasing power.
“We expect refinance volumes to increase mainly based on declining mortgage rates,” Freddie Mac remarked. Despite these positive indications, high homeowner insurance costs are identified as another layer adding complexity. With premiums rising significantly over the past few years, low-income property owners feel more pressure compared to higher-income counterparts, creating barriers for accessing homeownership.
The forecasting from Freddie Mac contrasts with perspectives from other institutions, including Fannie Mae, as the industry adjusts to fluctuated interest rates. Analysts anticipate modest price growth alongside home sales increases due to these changing economic conditions.
Both Logan and Palacios reiterate the projections of potential disruption based on political ideologies, particularly those impacting immigration and tariffs. Logan articulates, “The primary drivers of real estate demand remain rooted firmly within the U.S. economy, and fluctuations within those policies could heavily influence market dynamics.”
The looming question revolves around whether the continuation of Trump’s previous policies could reinvigorate certain luxury markets or inadvertently pressure affordable housing rates negatively.
Logan holds out the prospect of opportunities within tax cuts for wealthier buyers or businesses, potentially enhancing demand for luxury properties, which dovetails with plummeting demand for rentals as inflation pressures rise. “Higher mortgage rates would continue to put barriers up for middle and lower-income buyers,” he states. Meanwhile, plans to expand construction on federal land become central to discussions on addressing the housing crisis.
Palacios emphasizes, “While limited regulations could expedite housing production, they also pose risks concerning quality and environmental standards.” These insights compel stakeholders across the industry to remain vigilant about proposed policies likely to change housing markets.
Mark Calabria, former head of the Federal Housing Finance Agency, raises another layer of complexity by weighing the role governmental sponsored enterprises (GSEs), like Fannie Mae and Freddie Mac, exert on the mortgage market. Although defenders argue they sustain affordable mortgage products, Calabria asserts their effects skew toward leveraging risks rather than addressing housing availability.
“What we see repeatedly is not increased homeownership but heightened mortgage debt,” he explains. This framing suggests the GSEs' heavy market involvement might yield disadvantages like inflated housing prices without significantly improving homeownership rates.
Conclusively, the outlook for housing leading up to 2025 remains rife with uncertainty where political developments can magnify supply and demand fluctuations. Will housing shortages exacerbate, or will new policies shift dynamics benefitting buyers seeking affordable options? Stakeholders must navigate these trends with caution as they prepare for significant changes driven by economic and political transformations anticipated over the next few years.