The housing market, unlike the stock market, does NOT make sudden moves based upon elections. Buyers still buy and sellers still sell, regardless. But…tax policy and longer term public policies can and do impact real estate.
A good example of how longer term policies can affect real estate is the tax policy rewrite passed in December 2017, effective January 1, 2018. The new tax bill reduced the mortgage deduction cap to $750,000 for first and second homes from the former $1M deduction. The new cap of $10,000 for combined state and local deductions has already had an enormous impact on homeowners…thousands are relocating from coastal states to low-tax states. And, pass-through entities and S-corporations, for which some agents/brokers may qualify, allow a 20% deduction on business incomes.
The new tax bill will likely NOT get a major rollback any time soon in the divided Republican-controlled US Senate and Democratic-controlled US House of Representatives. It’s also unlikely, even if both the Senate and House passed joint rollbacks, the President would sign any such rollbacks.
Despite the fact that Congress approves the federal budget and funding for all major government departments, it’s highly unlikely that this divided Congress will enact any budget cuts. Again, it would be extremely difficult to agree, sign or pass joint bills to reduce the country’s enormous budget deficit.
Flood insurance, initially suspended in the early stages of the government shutdown but now re-enacted, will likely not be reformed during this Congressional session. There is no re-authorization or partisan support of the “Twenty-First Century Flood Reform Act” to “fix” the 49-year old flood insurance plan. On average, premiums cost $650/year for flood insurance but premiums can spin out of control in coastal regions of the country. The legislature had authorized new mapping techniques last year that would reduce flood insurance rates by calculating the “true risk” of flooding farther inland but additional legislation would be required to enact any new mapping techniques.
The Trump Administration is floating the idea to end the conservatorship of Freddie Mac and Fannie Mae but the Democrats in both Houses of Congress would not pass such a proposal. Such a proposal would completely untether these entities from the traditional mortgage market. Additionally, such a proposal would make the Department of Housing and Urban Development responsible for all the country’s affordable housing objectives.
One thing the housing industry CAN count on in 2019 is the continuance of executive orders from the executive branch of the government. Such executive orders are expected to further relax, if not totally wipe out, financial regulations that relate to housing and real estate and to further relax, if not wipe out, any enforcement provisions for environmental protections.