Four Ways the 2025 Housing Market Could Be Affected by the Next Administration
The housing market has been through a whirlwind over the past few years. From skyrocketing home prices during the pandemic to rising interest rates that slowed growth, the real estate landscape has been anything but predictable. As we look ahead to 2025, here are some ways the housing market might evolve with Republicans controlling the House, Senate, and Presidency.
1. Construction and Housing Supply
The nation faces a housing shortage that has strained affordability, with median home prices currently about 5.2 times the median household income. This imbalance has highlighted the need for more housing supply.
Industry professionals expect the Administration's focus on deregulation to make it easier for developers to build new homes and predict that loosening building regulations could reduce construction costs, accelerate timelines, and encourage private developers to step in.
Addressing regulatory barriers could potentially boost the housing supply, provide relief to the market, and make homes more accessible to buyers.
2. Tax Policies and Incentives
There is widespread speculation that the 2017 Tax Cuts and Jobs Act (TCJA) will be extended. This could have mixed implications for the housing market.
On one hand, policies like the doubled standard deduction and caps on state and local tax (SALT) deductions may leave middle-income families with more money to spend on homes. On the other hand, high-income homeowners might feel the pinch of reduced property tax deductions.
For developers and investors, incentives like bonus depreciation, which allows for greater first-year deductions on properties, could spur more investment in rental housing. Some experts believe this could revitalize urban areas and provide more housing options.
3. Economic and Immigration Policies
Economic and immigration policies could bring both opportunities and challenges to the housing market. For example, deregulation could lower building costs, improving affordability. However, potential tariffs on imported building materials might disrupt supply chains and temporarily raise construction costs.
On the demand side, policies affecting immigration could play a significant role. Mortgage lender Jaye Hohman suggests that large-scale deportations could decrease demand for housing, potentially softening home prices and rents in some states. The extent of these changes will depend on how policies are implemented and the broader economic context.
4. Mortgage Rates and Affordability
Interest rates are another critical factor in the housing market's trajectory. Experts note that pro-business policies often boost the stock market, which can lead to higher bond yields and, in turn, higher mortgage rates.
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