It’s about time we brought this up! Real estate investing affects many stakeholders including buyers, sellers, landlords, renters, homeowners, among others. The unexpected election results have left all with nothing but questions. So how will Trump’s presidency affect real estate investing? Let’s dive into it.
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Real Estate Investing Under Trump: The Unknown
We know something for sure about real estate investing under Trump’s presidency, and that is – so much is still unknown. Investors’ inability to predict the future stems from the fact that Trump failed to thoroughly address real estate investing in his election campaign, and was rather vague towards the topic. Because no strategies for the housing market were addressed, investors are left to make speculations that may or may not be definite.
What we can say is that investors in red states are more confident of the US economy that those in blue states, who are definitely more skeptical of current conditions. The country’s financial markets in general may become volatile in the short run, which may lead to a weakened US dollar. This economic uncertainty has led many investors to become extremely cautious regarding investments at this time.
Another point one must keep in mind is the fact that November is usually a slow and quite period for real estate sales on the real estate market calendar, so it may be difficult to assess the effect of Trump’s win on real estate investing in the short run as uncertainty lingers about the market.
Based on the information at hand, here is what we know.
Construction is Expected to Improve
Several real estate analysts have concluded that Trump’s presidency may actually be good for the housing market due to his background in business and real estate development. Many are confident that Trump’s presidency will be good for the real estate market.
As for Donald Trump himself, he’s made some promises during his acceptance speech to “to fix our inner cities and rebuild our highways, bridges, tunnels, airports, schools, hospitals,” and to “rebuild our infrastructure and put millions of our people to work as we rebuild it.” He’s also suggested that he may be working to decrease the regulations on housing construction. If this is successful, supply and inventory shortages in the market may be corrected.
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International Investment May Decrease
We are familiar with Trump’s controversial comments and policies towards different minorities in the US. Because of this, international investors may be dissuaded from investing in real estate in the country due to fear and/or distress caused by Trump’s presidency. They may also be concerned about the risks that lie in post-election uncertainty.
These foreign investors are the same ones who buy the more expensive properties in the market. They are also the same investors who play a key role in construction and investment projects in different parts of the US. Losing them may reduce construction, foreign investment, and increase overall construction costs – something that may cause economic activity to decline, and inflation to increase.
Additionally, because interest rates are increasing, foreign investors may see a decrease on ROI and may be further discouraged from real estate investing in the US.
The Rental Market May See a Boost
Interest and mortgage rates affect almost everything in real estate investing. Both rates have already risen post-election. What does this mean for the rental market? The increase in mortgage rates could mean less people will able to buy homes, driving up the demand for rental properties.
Investors await the long term effects of this rise. But for now, if you’re already invested in a rental property, expect demand to surge. And if you needed yet another reason to encourage you to invest in a rental property, this is it!
On the other hand, Trump has promised to bring back the “American Dream” of home-ownership right after the US Census Bureau announced that home-ownership rate in the US has hit its lowest since 1965. He tweeted: “American homeownership rate in Q2 2016 was 62.9% – lowest rate in 51yrs. WE will bring back the ‘American Dream!’” But how much of this will pertain to the reality of real estate investing is still unknown.
Inflation May Be Driven Up
What many experts fear about Trump’s construction and infrastructure campaign promises is the fact that they lack tangible action plans. The concern is that this will only drive up inflation forces without seeing corresponding increases in wages. Additionally, Trump’s campaign to limit immigrants from entering the US market could affect both real estate investing, as well as the labor force. The construction industry in the US is heavily dependent on immigrant labor. So if Trump were to succeed in limiting immigrant workers from entering, this will definitely drive up the costs of construction.
Moreover, Trump’s discussed more protectionist international policies such as increased tariffs on imports. Such policies cause concern because they may backfire and end up increasing the cost of goods and labor. This will in turn further pressure inflation forces, and in effect, discourage investment. It could also discourage local investors.
To Sum Up…
Consumer confidence may be shaken in the short run, affecting demand, mortgage rates, interest rates, inflation, among other factors. Investors are hoping the surprise of the election will wear off soon, and once that happens, there will possibly be a stable housing market again in which all stakeholders will be to operate. So for now, give things time to settle and keep your eyes peeled for future developments in real estate investing!
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