Trump Second Presidency Likely to be More Pro-Business and Regulation Resistant, but Tariffs and Immigration Loom as Potential Threat to U.S. Real Estate Market
BETHESDA, Md., November 7th, 2024
Leading real estate consulting firm RCLCO Real Estate Consulting has released a special report on the recent election of Donald Trump, written by Managing Director of RCLCO, Gregg Logan.
With Donald Trump’s election to the U.S. presidency on November 5, 2024, the U.S. real estate market faces significant potential shifts. Trump’s background in real estate and previous administration’s business friendly policies suggest that his new term could introduce notable changes across both commercial and residential property sectors, potentially even a return to less regulation. As of this writing a Republican Senate and potentially (although still not decided) House might clear the path for this.
Opportunities
• Tax Cuts and Regulatory Easing: Potential short-term stimulus for commercial real estate as tax cuts and reduced regulations might encourage business expansion and investments.
• High-End Real Estate Demand: Potential tax breaks favoring high-income individuals may drive demand for upscale and luxury properties, leading to higher activity in exclusive markets.
• Opportunity Zone Program Renewal: A renewed program similar to his first term could attract significant private capital, boosting commercial interest in underserved neighborhoods.
• Pause in Regulatory Momentum: Some regulatory initiatives, such as rent control, are unlikely to be on the Federal agenda.
Challenges
• Tariff-Driven Inflation and Higher Interest Rates: Proposed tariffs on imports, especially a 60% tariff on Chinese goods, could increase construction costs, driving up prices on housing and commercial projects. Tariff-induced inflation may lead the Federal Reserve to raise interest rates, further impacting new home affordability.
• Federal Deficit and Inflation Risks: High federal spending combined with tax cuts could grow the deficit, putting additional upward pressure on interest rates. Inflation, would increase costs for construction materials, labor, and mortgage rates, dampening real estate demand.
• Labor Shortages Due to Stricter Immigration Policies: Tighter immigration may reduce the labor pool for construction, increasing wage pressures and project costs. Additionally, a lower influx of immigrants could reduce demand for rental housing in major cities.
• Affordable Housing Challenges: Rising construction costs and mortgage rates will continue to complicate affordable housing development Further, the new administration is not likely to take up the push for supporting increased housing production as Demographic talking points considered.
Conclusion: Navigating Trump’s Second Term
Trump’s potential influence on the real estate market is a mixed bag of potential influences. In Trump’s first term, the Tax Cuts and Jobs Act (TCJA) of 2017 temporarily boosted GDP growth, led to a short-term increase in corporate profits and spurred a rise in consumer spending and business investment. But this disproportionately benefited the wealthy and corporations, with only modest wage gains for most workers. Meanwhile the tax cuts substantially increased the federal deficit, raising concerns about long-term fiscal sustainability. This time around his policy’s influences on inflation, a growing federal deficit, and a tighter immigration policy could similarly lead to mixed results for the economy overall and real estate in particular, making adaptability essential for industry stakeholders.
RCLCO senior leadership is available for interviews or speaking engagements on the topic of how the election results may impact the real estate industry. Please also see the longer and more detailed version of this article here.
Media Contact
Rachel Hoeft
Marketing & Graphic Design Manager
E: rhoeft@rclco.com
