Every incoming administration brings new ideas and inherent changes. And it seems that the Trump presidency is bringing change to the real estate industry and associated policies and regulations. Considering the new president’s background, a focus on real estate is not entirely surprising.
This focus was evident on Trump’s first day in office when he put forth an action to suspend cuts on mortgage premiums. The 0.25 percentage point premium rate cut was intended for loans backed by the Federal Housing Administration (FHA), and the move would have lowered the real estate barrier to entry. The cut was expected to help more buyers qualify for an FHA loan and reduce the upfront investment with lower down payments and closing costs. If the cut is officially reversed, it may make private mortgage insurers and conventional loans more attractive to buyers.
That said, the current suspension isn’t a definitive reversal. Some mortgage industry experts still believe the cut may happen after further review.
The administration is also considering changes to the 2010 financial regulatory law commonly known as Dodd-Frank. Shifting regulations would also have impacts on the Consumer Financial Protection Bureau, which was established as part of this law. It effectively added more checks and balances to real estate transactions, mortgage lending and more. In the aftermath of the 2008 recession, Dodd-Frank offered more protection to consumers. However, financial institutions have felt the stress of meeting growing compliance, and it is something that can be felt by buyers and investors as it has made the home-buying process seemingly longer and more complex.
On February 3, Trump made steps toward easing the regulations under Dodd-Frank, but further changes will likely take some time. The potential repeal of Dodd-Frank has many effects. For one, there may be less of a safety net for consumers should the economy ever mirror the late 2000s again. On the other hand, it could shorten the time it takes to close on a home and bring movement to the market for buyers and sellers alike. This is certainly one area that the real estate industry is monitoring closely due to its far-reaching effects.
Shifting Roles in the Real Estate Market
There are a few shifting and available roles within key government organizations — like the FHA and Ginnie Mae — and new leadership may mean new direction for the real estate industry.
Ben Carson was recently confirmed as the secretary of the Department of Housing and Urban Development (HUD) and has noted theneed for clarity in mortgage lending.
Ted Tozer left his role as president of the Government National Mortgage Association, also known as Ginnie Mae, in January. Most notably, Tozer allowed access to independent mortgage bankers.
In addition, there are a few candidates in talks to take over as the next FHA commissioner. The decision will likely impact whether the FHA will expand its role in the market or take a looser approach to policy.
The Federal Reserve & Rates
Interest rates increased in December for the first time in 2016. While not a significant jump at a quarter points, it was a sign of an improving economy and potential for inflation. Overall, it showed a confident Federal Reserve despite changing White House leadership.
Moving forward, the central bank’s 2016 projections placed economic growth at 2.1 percent for 2017. They also expect the industry to see three rate increases this year. These projections are certainly contingent on government decisions toward taxes, federal spending and more.
Needless to say, the Trump presidency has already caused a lot of movement in the industry, and how things will shake out is still yet to be seen. For those weighing the pros and cons of buying a house or investing in high-end real estate right now, it’s important to remember that change isn’t always bad. Not to mention, those in thriving west coast markets — like the Scottsdale real estate market— will ultimately be resilient and more easily adjust to whatever the future may hold.