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As President-elect Donald Trump prepares to take office this month, he faces a very different housing market than he did in his first term.
A sharp decrease in home affordability over the last four years has stung for many Americans and Trump won his bid for US president partly on the back of dissatisfaction with the economy.
Now Trump, a billionaire property developer himself, faces a housing conundrum: Mortgage rates aren’t falling, and home prices are expected to continue rising over the next few years. Many economists estimate that this year’s housing market will not look dissimilar to the frozen-in-place housing market of the last few years. At the same time, many of Trump’s proposed policies, including tariffs and mass deportations, could potentially exacerbate America’s home affordability woes.
The standard 30-year fixed mortgage rate, the most popular home loan option, was just below 2.8% when Trump left office in January 2021 during the pandemic. Last week, it was 6.91%. That means people who borrow money to buy a home must now pay hundreds, or even thousands, more per month than if they had bought a home for the same price four years ago.
Home prices have also risen significantly since then. From January 2021 through October 2024, the latest data available, national home prices have jumped 37%, according to the S&P CoreLogic Case-Shiller Home Price Index.
“I see very little reason the housing market will get better this year,” said Jim Parrott, a nonresident fellow at the Urban Institute and a former senior adviser at the National Economic Council.
Trump didn’t share a formal policy plan on the campaign trail aimed at improving housing affordability, but in a statement, Taylor Rogers, a spokesperson for the Trump-Vance transition, said that Trump would end the housing affordability crisis during his upcoming term.
“President Trump will deliver on his promise to Make Housing Affordable Again by defeating historic inflation and reducing the mortgage rate,” Rogers said. “President Trump will ban mortgages for illegal immigrants who drive up the price of housing, eliminate federal regulations driving up housing costs, open portions of federal land with ultra-low taxes and regulations for large-scale housing construction. The cost of new homes will be cut in half, and President Trump will end the housing affordability crisis.”
Trump has often discussed how regulations added burdensome costs to his property development projects. During his campaign, he promised to cut regulations for homebuilders, which can add to a new home’s list price. A 2021 study from the National Association of Home Builders found that regulation accounted for $93,870 of a typical new home’s final price. At the time, the average price of a home was $394,300. As of November, it’s $484,000, according to the US Census Bureau.
However, many of those regulations are the result of local laws, something Trump promised not to meddle with during his first term. In a 2020 op-ed in the Wall Street Journal, Trump and then-Housing and Urban Development Secretary Ben Carson vowed to “protect America’s suburbs,” backing local single-family zoning laws, which critics say often prevent new affordable homes from being built.
America’s housing troubles are partly due to years of chronic underbuilding after the housing crisis in 2008 and the Federal Reserve’s recent interest rate-hiking campaign to tame a historic bout of inflation. Many of Trump’s policy proposals risk deepening those issues.
“A lot of what Trump has said points in the wrong directions, as far as home prices go,” Parrott said.
Parrott pointed to Trump’s vow for mass deportations, which could hobble home construction.
While an influx of immigrants can drive up housing demand in areas where housing is already scarce, potentially increasing competition for homes, they also help expand the supply of homes, given the outsized role of undocumented immigrants in the US construction industry.
Some of Trump’s other policy proposals threaten to raise the cost of buying a home, as well.
“The big mover in affordability is really mortgage rates,” said Lawrence Yun, chief economist at the National Association of Realtors. “If the mortgage rate goes from 7% today, to closer to 6% or lower, that would make a big difference in affordability.”
Despite the Trump transition’s promise to reduce rates, mortgage rates track the 10-year Treasury, which trades, in part, on the perception of where inflation will go in the future. Trump’s threat of broad-based tariffs, which some economists warn could reignite inflation, may keep interest rates and, therefore, mortgage rates, elevated.
Higher interest rates would also hurt homebuilders’ ability to ramp up new home construction.
Trump’s first administration tried and failed to privatize Fannie Mae and Freddie Mac, the lending giants that guarantee 70% of America’s mortgages. If he were to renew that fight, that could also cause a hike in mortgage rates, Yun said.
Working toward a solution to America’s housing crisis may prove to be a pressing issue for voters in upcoming elections, Cowen financial policy analyst Jaret Seiberg wrote in a note to clients last month.
“Our view is the GOP will need to address entry-level housing inflation in order to win future elections,” Seiberg wrote. “We believe entry-level housing inflation opens the door for Democrats to outperform in the mid-term election and gives them an edge in the 2028 presidential election. Republicans, in our view, appreciate this risk. It is why we expect action.”
However, the NAR’s Yun believes some of the current pressures on America’s housing market may begin to ease on their own.
Homes are sitting on the market longer, meaning that steeper price cuts may soon be on the horizon and pending home sales rose for the fourth straight month in December, according to NAR data. Many house hunters are beginning to accept that mortgage rates around 6% are likely here to stay and have stopped delaying their home purchase plans.
“I think the low point in home sales was pretty much done in 2024,” Yun said. “More people will be able to succeed in buying and more people are coming onto the market to list their properties. I think there will be more movement in the housing market this year.”
