What Trump’s 2nd term could mean for the housing market: Expert weighs in

WASHINGTON - Following President-elect Donald Trump’s nomination of former NFL player, Scott Turner, to lead the Department of Housing and Urban Development, some experts are speculating what the housing market in America will look like during Trump’s second term. 

Pierre Debbas, a real estate analyst, broke down what he believed should be at the top of the Trump administration’s to-do list when it comes to the housing market going into 2025 and beyond. 

"I’m going into next year with a very optimistic perspective," Debbas told LiveNOW from FOX’s Andrew Craft. 

Despite a housing market sales slump that dates back to 2022 and further, Debbas said there’s really nowhere else to go but up. 

"Now, whenever you have a dip in transaction volume of that magnitude, the rebound, which, you know is inevitable, is going to be a rather sharp rebound. And it wasn't a dip just for 2023. It's been really the last two or three years. We've been in a suppressed market in terms of transaction volume. So I think that once rates do hit a new norm, which all of us are expecting to be in that 4 ½ to 5 ½ world, prices hopefully won't appreciate much, in some markets, come down. And honestly we've gone past an election in which the stock market has responded very positively, which is only going to help the momentum going into the housing market in 2025," Debbas added. 

Affordable housing is the most important

Turner was credited with leading the White House Opportunity and Revitalization Council during Trump’s first term. 

The mission of the council was to coordinate with various federal agencies to attract investment to so-called "Opportunity Zones," which were economically depressed areas eligible to be used for federal tax incentives. 

Debbas believes programs such as this could help alleviate the demand for homes and incentivize developers to create more affordable homes for the middle class. 

Regulate Wall Street and cut interest rates

In addition to incentivizing developers to create more affordable housing as opposed to luxury homes, Debbas believes the incoming Trump administration needs to address how Wall Street operates in the housing market. 

"I think we have to regulate Wall Street in terms of their appetite for acquiring single family homes as investments. I don't think we want to live in a society where your average household is renting a $400,000 house from Goldman Sachs," Debbas said. 

Another key component that Debbas believes Trump’s administration will have to reconcile is interest rates. 

"The market's not going to move until rates come back to more of a balance. We're not going to go back and see the 2% or 3% interest rate environment. But going from 2%-3% to north of seven was an astronomical jump that had a horrible ripple effect on transaction volumes over the country," Debbas said. 

Expand HUD’s programs

HUD is responsible for addressing the nation’s housing needs. It also is charged with fair housing laws and oversees housing for the poorest Americans, sheltering more than 4.3 million low-income families through public housing, rental subsidy and voucher programs. 

The agency, with a budget of tens of billions of dollars, runs a multitude of programs that do everything from reducing homelessness to promoting homeownership. It also funds the construction of affordable housing and provides vouchers that allow low income families pay for housing in the private market. 

Debbas believes expanding the demographic for those to qualify for an HUD loan when buying a home could be in the realm of what the Trump administration can influence. 

"HUD loans traditionally come at a lower interest rate, with less downpayment. They require purchase money to acquire insurance for those loans because in reality, they're high risk loans. So I think that expanding maybe HUD's purview in that regard, where A: maybe there's preferential rates and we expand the income eligibility because in reality, housing prices have gone up 50% to 100% throughout the country, depending on the location you're in. So the people who can't afford the housing currently, has only increased. So I think we need to expand, you know, the eligibility for those programs," Debbas said.  

Don’t expect pre-COVID rates

Forecasting the trajectory of mortgage rates is difficult, given that rates are influenced by many factors, from government spending and the economy, to geopolitical tensions and stock and bond market gyrations. 

Leading up to the election, housing economists had generally expected the average rate on a 30-year mortgage to drop through the end of this year to around 6% and then ease further next year. Now, economists at the Mortgage Bankers Association and Realtor.com expect the average rate will hover around 6% next year, while those at First American says it’s possible that rates decline to around 6% but not a given. 

The National Association of Realtors estimates that the average rate on a 30-year mortgage will bounce between 5.5% and 6.5% during Trump’s second term. 

"If the Trump administration can lay out a credible plan to reduce the budget deficit, then mortgage rates can move downward," said Lawrence Yun, NAR’s chief economist. 

Regardless, don’t expect mortgage rates to return to the lows they hit during Trump’s first term, which started in late January 2017 and ended four years later. 

Back then, the average rate on a 30-year mortgage ranged from a record-low of 2.65% to 4.94%. Mortgage rates fell sharply in the last year of Trump’s first term as the economic fallout from the COVID-19 pandemic led investors to seek the safety of U.S. government bonds, which sent their yields sharply lower.