Investor confidence went through the roof at Donald Trump’s election last November. Just take a look at the stock market…it’s posted all time highs throughout the entire year.
Trump’s presence in the White House has made the housing market more expensive as well. As usual, when stocks rise, bonds usually sell off and bond yields rise. As mortgage rates usually follow yields on the 10-year Treasury, rates on the popular 30-year fixed mortgage rate went from 3.5% to 4.3%, stayed above 4% for the first half of the year and have remained just about there since.
Despite money becoming more expensive along with housing, consumer and homebuilder confidence in the housing market didn’t dampen…until now.
Homebuilders had anticipated that Trump would make good on his campaign promises to deregulate. So far, that hasn’t happened in the housing industry. Add the proposed tax plan which may cut housing deductions and it’s a different story.
Even without the proposed tax plan, builders bemoan the high cost of labor, land and materials. And builders bemoan the Trump’s anti-immigration stance since immigrant labor has, up until now, fueled the construction business.
Patrick Hamill, CEO of Denver-based Oakwood Homes, said, “We need a national immigration reform bill. We have people afraid of being deported so they’ve gone underground. It’s just made housing expensive.”
The consequences of lack of supply that continues to push housing prices higher? First time and move-up buyers are sidelined, affordability weakens, rising interest rates further weaken the market, existing home sales are down, sales inventories shrink and single family home construction lags behind demand.
Ralph McLaughlin, chief economist with Trulia, said, “The important question here is whether the optimism we saw after last year’s election has manifested itself into the housing market this year. We aren’t seeing signs that’s the case.”
McLaughlin continued. “Softening of many of these indicators isn’t necessarily the result of anything the Trump administration has or hasn’t done but, rather, we were expecting a possible bump in housing and we haven’t seen that yet, unlike the labor market and unlike the stock market.”
In fact, under Trump, housing market conditions have worsened. According to Fannie Mae, high prices have doused consumer optimism in housing. One half of the largest markets are considered overvalued.
Those “overvalued” housing prices are juiced by the Fed’s monetary policy. Peter Boockvar, chief market analyst with the Lindsey Group, believes that “…if the public understood Fed policy, renters and…millennials looking to buy a home would be marching on the Fed (Eccles) Building.”
REALTORS, home builders and consumers alike are more worried about housing costs and the possibility of losing tax advantages of homeownership with the Republican proposed tax bill. Bottom line…Trump slump, not Trump bump.
