Donald Trump’s re-election seems to have had immediate consequences for housing in America. Demand from home-buyers requesting service through Redfin’s site, which was already stronger since the Federal Reserve’s September 18 rate cut, was about 25% higher this weekend than the same weekend last year, the largest year-on-year gain since the downturn began in 2022. Some buyers are undoubtedly enthusiastic about a Trump economy; others may have been waiting to make major decisions until after the election.
High Rates, High Demand
It’s far too early to say whether this increase is a flash in the pan or the start of a new trend, but any increase already flouts the laws of gravity. Rates on 30-year mortgages rose from 6.20% on October 1 to 7.13% the day after the election, in anticipation of President Trump’s re-election, and the possibility of higher tariffs, which can raise prices for imported goods. The rise in rates increased the monthly mortgage payment for a median-priced U.S. home by about $200.
Rates Rose in Anticipation of Trump Tariffs
Rates as of November 8 had eased slightly, to 6.92%, but Treasury bond yields indicate that the market believes that rates on mortgages and other loans are unlikely to change much over the next year. As recently as this summer, there was a broad consensus that mortgage rates in 2025 would fall below 6%. Because of our concern about mortgage rates, our own economics team on Friday had told Redfin execs to prepare for the possibility that U.S. home sales could stay almost the same in 2025 as in 2024, when existing U.S. home sales are expected to hit an historical low. This weekend gave our execs at least one reason to be more optimistic.
A Perfect Storm for Home Affordability
But what if demand and rates are high? This bizarre pairing could set up a major challenge for a president elected to beat inflation: many people may hope to buy a home in 2025, even as the cost of doing so keeps rising. Almost all other inflation has mostly already fallen to near the 2% target that the Federal Reserve considers ideal. But home prices posted a year-over-year increase of 4.2% in August, hitting a 15th consecutive all-time high in the Case-Shiller index, despite record-low home sales. This data doesn’t even account for rapidly rising insurance costs in flood-prone and wildfire-prone areas.
Memo to The Real Estate Developer in Chief: More Housing Please
This is why we need the government to invest in a new American dream. The young voters who, after years living in their parents’ basement, swung right in this election, will expect President Trump to act as America’s real estate developer in chief, and build the housing that they need. He can do this by setting aside well-meaning regulations on home-building that limit construction and make housing less affordable: local comment periods, traffic studies, parking requirements, environmental reviews in already well-settled areas, and limits on apartment buildings in neighborhoods of single-family homes. These rules are set by state and local governments, but the federal government could create a strong incentive for states to adopt simplified and consistent housing regulations, just as it does with the drinking age. Depending on whom you listen to, the magnitude of the U.S. housing shortage is between 2 million and 5 million homes. Many of America’s problems are hard to solve, but this one isn’t, especially for a president who loves construction.
