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21 January 2025 January 2025 » C O V E R S T O R Y worried about. Mass deportations would almost certainly severely disrupt the U.S. labor market and result in labor shortages in many industries, including construc- tion. The scarcer the labor is, the more expensive it will be to build new homes, and the higher home prices will climb. If Trump's policies are implement- ed as he has discussed them in the past, we'll probably see a much more expensive housing market where getting a loan is considerably more challenging and where the risk of an outright market collapse is higher than today. These changes may not happen overnight— economic reforms usually take a while before their impact is felt by everyday people. Even so, some of Trump's policies are so extreme that their impact could be much more dramatic and fast-acting than people realize. Q: How do you expect interest rate policies from the Fed- eral Reserve to influence mort- gage rates, housing affordability, and demand in the coming year? If Trump's policies prove to be inflationary, then the Fed may decide to prematurely end its nascent rate-cutting cycle. Higher inflation may even mean they reverse course completely and begin increasing their target funds rate again. This, along with continued un- certainty in the bond market owing to things like the potential for higher government deficits, will likely push mortgage rates higher over the coming year. I can't say exactly where they'll end up, but if President Trump's policies look like candidate Trump's, I wouldn't expect rates to fall below 6% anytime soon. We may even need to make peace with rates staying near or above 7% over the next year. Q: Do you anticipate major shifts in housing construc- tion or availability due to potential changes in federal regulations, tariffs, or supply chain dynamics? If Trump's policies look like those he has discussed on the campaign trail, then I think we probably will see major shifts in housing construction and availability. Mass deportations alone would be enough to disrupt housing construction, and if you add tariffs and a potential global trade war caused by said tariffs into the mix, you've got a rec- ipe that results in fewer, higher-priced homes being built. However, "major" might end up being too strong a word, depending on what Trump does once in office. If all we end up getting are some tariffs on specifically targeted goods, and if mass deportations don't come to fruition, then housing construction could get more expensive, though not "majorly" so. Q: Which regions or cities are likely to experience the fastest growth or declines in housing prices, and what factors are driving those trends? It's tough to predict what will happen to the housing market nation- ally over the next year, and even more difficult to say what will happen in in- dividual markets. Part of this is because individual markets can bring with them a ton of quirks that are hard to identify. Another is that data isn't always very robust at more local levels. This can lead to contradictory pieces of data. For example, Zillow says home prices in Miami are up about 6% from last year; Redfin says they're down 7%. Because of that, I just don't have enough readily available data to provide much concrete insight into what individ- ual regions or cities are likely to do over the next year. If I had to hazard a guess, I'd say that persistently high rates will continue to be an especially noticeable drag on price growth in especially high- cost areas like San Francisco. At the same time, tariffs and mass deportations may make it more difficult for states like Texas (which seems to have done a pretty decent, albeit not perfect, job of constructing homes in recent years) to continue building housing. This could result in prices jumping in some rela- tively lower-cost areas. For the most part, I'd argue that things like mass deportations and tariffs will put upward pressure on prices just about everywhere. We'll just have to wait and see how much of that upward pressure is counteracted by persistently steep mortgage rates and a potentially weakening economy. Q: What demographic groups—such as first-time buyers, retirees, or investors—are likely to benefit or be challenged by the predicted market condi- tions? The combination of potentially higher inflation and interest rates that we may see under Trump will likely make homebuying more challenging for pretty much everyone. Some wealthy buyers, who earn high incomes and have a lot of cash on hand, might be able to take advantage of their hypothet- ically lower taxes to make buying easier. In a similar vein, investors may face less pushback when it comes to doing things like buying up single-family homes. However, (and I know I sound like a broken record here) should they come to pass, mass deportations and tariffs are probably going to offset any benefits of lower taxes and deregulation. Q: Given concerns about housing affordability, do you foresee federal or state gov- ernments implementing policies to address housing shortages or rising costs? If so, how effective do you think these will be? At the national level, probably not. As mentioned above, Trump's policies are more likely to exacerbate housing shortages and increase costs than they are to reduce shortages and lower prices. The steps that Trump has talked about that are meant to make housing more afford- able—like opening up more federal land to development, cutting taxes, ending unspecified regulations, and somehow ar- bitrarily lowering mortgage rates—proba- bly aren't going to be enough to offset his other policies which push housing costs higher. What's more, some of what he's