The Real Estate Climate Post-Election and the Trump Effect from David Askar
“A shift in the political administration is always bound to influence the real estate market,+ says David Askar of DreamTree Inc., “though it often takes well over a full year following a presidential election to properly assess the impact.” Although many real estate analysts had preconceived bullish notions about the Trump impact on real estate, there are few trends and predictions that can be assessed at this time that David Askar points out.
The Rise in Home Prices and Decline in Inventory
The degree to which the election has informed the current market is not yet entirely clear, but the median home sale price increased 7% in January (to $261,100) while home sales rose 5.6% over last year. Meanwhile, housing inventory dropped 12% from last year, in part because of a decline in listings. “From 2010 to 2017, market trends continued to show strong indicators of a seller’s market. Single family homes are selling at an average of fifty-nine days, slashing market time by one full week from the previous week and two full weeks from the year prior to that.”
The Potential Consequences of President Trump’s Economic Strategies
“Be cautiously optimistic,” says David Askar of DreamTree Inc. “President Trump’s plan to stimulate the economy lies in deficit spending and deregulation which the market has responded to thus far by selling off bonds and buying bank stocks, in turn increasing interest rates roughly 1% (e.g. increasing a $300,000 mortgage by about $250 a month). This could in theory cause a market slow down, but on the other hand, decreased regulation could promote better loan options for those with problematic credit histories. Likewise, deficit spending could, at least ideally, create more jobs and consequently more eager and actionable homebuyers.”
The Impact of Tax Reform
If Trump’s proposed tax cuts pass, the housing market will almost certainly see a higher demand, as more discretionary income means more money available for mortgages. Specifically, President Trump’s first draft of a tax-cut plan rolled out in April, “...intends to keep home mortgage interest deduction, while doubling the standard deduction,” says Askar.
“While this has the potential to stimulate the market and incentivize buyers, David Askar reports, “It is critical to keep the $250,000 single and $500,000 Married Tax Sale exclusion in place for it could cause a frenzy, with couples selling to avoid any future proposed tax. This exclusion could increase inventory significantly and shift the market in the buyer’s court, ultimately decreasing home values.”
Go to www.davidaskar.com for more real estate expertise by David Askar.