Housing's coming year faces multiple pressures
By Conor Sen / Bloomberg Opinion
It’s now half a decade since anything in the U.S. housing market could be considered normal.
The pandemic boom was followed by a transaction bust, induced by the central bank, that did little to lower sky-high prices. Going into 2025, a lack of affordability continues to sideline buyers, while potential sellers feel stuck in place, tied down by covid-era mortgages. The slump in transactions has hurt real estate agents, lenders and furniture companies. Homebuilders, until now somewhat insulated from the housing blues, are beginning to feel pressured by a buildup in inventory, and multi-family landlords, by a rise in vacancy rates. Lower mortgage rates should help, but there’s little indication of that happening soon and some signs that borrowing costs may get worse before they get better.
Will Trump’s agenda push mortgage rates higher?
Businesses and investors have largely cheered the news of Donald Trump’s return to the White House with a pro-growth agenda of tax cuts and deregulation. Stocks tied to the housing industry haven’t shared the enthusiasm. The iShares U.S. Home Construction exchange-traded fund has slumped about 15 percent since Election Day, partly because of a surge in 10-year U.S. Treasury yields. What the housing industry needs more than anything else in the new year is lower mortgage rates. Lower taxes and cutting red tape just won’t move the needle as much as home buyers seeing 5.50 percent home-loan rates again. That would make what’s currently an unaffordable market seem within reach once more, unfreezing transactions of both existing and new houses.
Instead, the 30-year mortgage rate is back above 7 percent after fallen into the low 6 percent range in September, rising along with Treasury yields. The prospect of a stronger economy and faster inflation will only push that benchmark higher, or at least leave it at elevated levels next year. This is very different from the scenario that Trump walked into in 2017. Mortgage rates were then around 4 percent, consumers hadn’t been scarred by four years of too-high inflation, and there were few negative tradeoffs to further stimulating the economy. That same home construction ETF rose by over 50 percent in the 12 months following Election Day in 2016. Trump’s reputation is intertwined with real estate, and the tension between the MAGA agenda and what it means for real estate might be one of the defining economic tensions of his second term in office.
https://www.heraldnet.com/opinion/comment-housings-coming-year-faces-multiple-pressures/
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