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MortgagePoint » Your Trusted Source for Mortgage Banking and Servicing News 24 January 2025 C O V E R S T O R Y wider than the pre-pandemic average as the Fed continues to allow its MBS holdings to run off. Q: Do you anticipate major shifts in housing construc- tion or availability due to potential changes in federal regulations, tariffs, or supply chain dynamics? We expect some growth in sin- gle-family construction, but a bit of a pullback in multifamily construction, given the oversupply of apartments in some markets. Tariffs will likely add to housing costs, particularly if they are levied on critical inputs such as lumber. Tighter constraints on immigration will likely add to labor costs for homebuild- ers, which will be passed on to home- buyers in the form of higher prices. Q: Which regions or cities are likely to experience the fastest growth or declines in housing prices, and what factors are driving those trends? Nationally, we are forecasting 1.5% growth in home prices for 2025, as hous- ing inventories grow, and mortgage rates stay relatively flat. Markets that have seen inventories grow most quickly, including some in Florida and Texas, might be most susceptible to some small declines. Other Sunbelt markets that continue to be the beneficiaries of stronger population and job growth are likely to see faster than national home price growth. 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? With mortgage rates steady and a bit lower, and the rate of home price growth slowing, affordability conditions should improve a bit, but it will still be difficult for many potential first-time homebuy- ers. The increase in inventory should both increase the number of proper- ties these buyers might consider, and decrease the prevalence of bidding wars, but inventory is still expected to be tight at the entry level. Higher property taxes and insurance costs will further reduce affordability. For those boomers looking to downsize, they will have an impres- sive amount of home equity that they could use on their next home purchase given the rapid runup in home values in the past few years. 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? Federal initiatives to open up some federal lands for construction could be helpful. Additionally, regulatory changes at the state and local level which would decrease zoning constraints in other areas would also benefit supply. Finally, efforts to support the existing stock of homes through the expansion of programs like FHA's 203(k) could further add to the usable supply. Demand-side measures such as additional down payment assistance programs could help some first-time buyers but would add to demand pressures at the entry level of the market, and the price impact may offset the benefit to some extent. I would also add support for pro- grams like LIHTC which can help in the development of affordable housing. Q: How are real estate devel- opers and investors prepar- ing for potential economic or reg- ulatory changes under the Trump administration? Are there specific trends they are betting on? I expect there is greater confidence, given the electoral sweep, that the TCJA provisions will be extended and that tax rates will not increase as a result. Additionally, the expectation of a lighter-touch regulatory environment has boosted business confidence, as evidenced by the upturn in the stock market post-election. Q: Do you expect demand for rental properties to rise or fall in 2025, and how might this affect housing developers' strat- egies? Rental demand should stay steady in 2025, and this demand will eventually ab- sorb the excess supply of apartments that have been delivered to some markets. Over the medium term, as the Gen Z cohort is smaller than the millennial cohort, there may be some waning of rental demand. However, if affordability conditions do not improve, many young households could stay in rental units for longer, which would support demand for longer. Rick Sharga President & CEO, CJ Patrick Company Q: What economic policies or changes likely to be pro- posed or introduced by the Trump administration in 2025 will have the most significant impact on the housing market, and why? The Trump campaign didn't spend a lot of time discussing housing-specific policies, but its two biggest economic policy initiatives—mass deportation of undocumented immigrants, and high tariffs on imports—could both impact the housing market. While estimates vary, a large percentage of construction workers are immigrants, with many of those laborers being undocumented. Removing these workers will likely slow down home construction, exacerbating the problem the market already has with insufficient housing supply. If builders can find replacement workers, they'll probably be more expensive, which could result in home prices rising as well. Similarly, high tariffs are likely to increase the cost of imported materials and products for builders, costs which will almost certainly be passed along to homebuyers. On the other hand, the Trump campaign also pledged to eliminate