Trump or Harris? How the Election Could Shape Our Local Housing Market by Patrick T. Smith

Election Shifts: How the Next President Could Shape Our Housing Market

We will have a new president-elect in about 90 days. As a real estate professional, I can’t help but ask the question what effect will either of the current presidential candidates being elected to office have on the housing market? Maybe you are curious as well. Of course, what follows is a subjective, observational guess based on my understanding of each candidate's history and rhetoric. I'm going to do my best to break it down in a non-partisan way.

Potential Impact of a Trump Administration

If Republicans win the presidential election, there are several decisions that Donald Trump has indicated he will make that could impact the housing market considerably.

The Trump era Tax Cuts and Jobs Act of 2017 changed many aspects of the housing market, which extend to everything from deductions and depreciation to tax credits. While the Trump campaign has stated that they want these provisions to be extended, the Biden administration has indicated that they would be fine with letting the bill expire. The Harris campaign has yet to mention their stance on this issue.

It's believed that the Trump administration will look to boost capital gains relief for homeowners, which hasn't changed in nearly 30 years. When comparing a Republican presidency against a Democratic one, the former will likely focus on capital gains, while the latter will aim to provide tax credits.

Due to Trump's experience in the real estate sector, his presidency might involve limiting the red tape that developers must contend with. It's also possible that the administration would put more money into apprenticeship programs for carpenters and plumbers in an attempt to spur growth in the construction industry.

One aspect of a potential Trump presidency that's difficult to predict at the moment is how involved Project 2025, also known as the 2025 Presidential Transition Project, will be. This document was created by The Heritage Foundation and is effectively a list of the policies they hope Trump enacts during a second term. While the director of this group, Paul Dans, previously had a role in the Trump campaign, he resigned at the end of July.

Some aspects of Project 2025 involve the housing market. For example, they aim to "reset" the U.S. Department of Housing and Urban Development. Along with getting rid of the Consumer Financial Protection Bureau (CFPB), they also support an increase to the mortgage insurance premiums that are required with FHA loans.

Trump has also mentioned that the government's control over Freddie Mac and Fannie Mae could change during a second term. He believes that their government conservatorship should be ended, which means that this aspect of the housing market would be fully privatized. However, this is a lengthy and extremely complex process that might be too difficult to achieve, which is why the ramifications of such a move likely wouldn't be felt for years.

While the Trump campaign has signaled its belief that the CFPB should be disbanded to promote less regulation through enforcement, it should be noted that Trump's previous appointee to this agency performed 70 enforcement actions between 2019 and the end of 2020. Since late 2021, Biden's appointee has taken 60 actions. While this could change if Trump were to win the presidential election, there's also a chance that the agency would continue as it currently is

Potential Impact of a Harris Administration

Kamala Harris is a relatively new candidate to the presidential election, which means that her policies have yet to solidify in some areas. You can, however, expect that her initial positions won't differ too much from those of Biden's.

In this scenario, the housing market in and around El Dorado County will likely be impacted by the Build Back Better program, a Biden administration plan to rebuild the economy through infrastructure, clean energy, education, and tax credits targeted to low and middle income households. These programs might cause inflation to increase through new federal government spending..

Regardless of which candidate wins the presidential election, interest rates will likely drop in the coming months. There's a widespread belief among economists that the Federal Reserve will cut the federal funds rate at either the September or November meeting. Rate cuts promote affordability by making it easier for people and investors to purchase homes. If Harris becomes president, she may focus on providing additional benefits to lower-income consumers.

Keep in mind that Kamala Harris was heavily involved with negotiating settlements with mortgage servicers while she was the attorney general of California. These settlements were made following the 2008 financial crisis. Her experience in this endeavor might help her make savvy moves that could prop up the housing sector. Some people believe that Democrats are creating programs that bolster housing demand at a time when the industry is struggling with supply.

During the State of the Union address that President Biden made in March 2024, he called on Congress to approve a one-year tax credit for middle-class families who decide to sell their starter homes. However, these sellers could turn into buyers, which means that the pressure on the market might not change.

Harris herself has mentioned that she'll aim to get rid of late charges and hidden fees that banks and other types of companies levy. She also stated that she wants to cap unfair rent increases. While it's clear that the Democrat party is intent on addressing housing demand, the Harris campaign has yet to make statements about fixing the supply side of the housing market.

Until Harris expounds upon her policies regarding the housing market, it will be difficult to determine how a win for the Democratic party will shape this market in the coming months and years.

Keep in mind that the Supreme Court recently overturned the Chevron precedent that was set in 1984, which means that courts are able to rely on their own interpretations of laws. In this scenario, any changes that the president makes could be successfully challenged and overruled in the court system. Overall, it's expected that a Democratic administration will continue to address sustainable housing needs.

The Bottom Line

New administrations rarely impact the housing market immediately. It takes time for policies to be created, voted on by Congress, and signed into law. While the housing market tends to react to presidential election results, they rarely overreact. The current challenges regarding the housing market are less policy-based and more structural.

In this situation, a single administration may not do much that can positively or negatively drive the market. In the days leading up to the election, pay attention to how the market is reacting. If one candidate appears to be the favorite and the future economic outlook is positive, this indicates that the market believes the victor will stimulate growth.

Regardless of who wins I remain bullish on long term real estate. Upsizing, downsizing, expanding your holdings or divesting, I’m your guy. Please reach out with any real estate questions or needs.