by Tom Murphy
NMLS # 662141
Home Services Lending
Now that Donald J. Trump has been elected the next president of the United States, there is little doubt that one of the major focuses of his attention in the next months after he is sworn in will be how improve the US housing market. Mortgage rates are near all-time lows and the anticipated rise in employment and median incomes will surely strengthen the housing market across the nation.
There are many things that economists disagree about in the US, but nearly all agree that a strong housing market is vital to economic growth. Specifically, when the housing market is strong, people buy more homes and take out more loans. Builders build more homes, which leads to more economic growth. And when people buy more homes, they buy more goods and services for their homes.
So the housing market is absolutely essential to producing a good economy. We can only speculate on what exactly Trump would do with the housing market as president, but here are a few areas that he may want to explore to boost growth:
#1 Repeal Dodd Frank
The 2010 Dodd Frank law is widely reviled in the housing and lending industries because it makes it very difficult for smaller lenders to do mortgage and other types of loans. Many economists think that the Obama team made the Dodd-Frank law too onerous for many smaller lenders.
The largest banks have the resources to deal with all of the red tape of doing mortgage loans, but smaller banks tend to get squeezed out. Reducing competition for mortgage loans tends to make loans more expensive and harder to get. Trump could order an overhaul of Dodd Frank or an outright repeal to get more mortgage loans done for more homeowners. Bryan Dornan outlines 8 Changes that Trump Could Change in the Dodd-Frank Financial Protection Law.
#2 Look Into Other Mortgage Finance Reform
Engaging in reform of Fannie Mae and Freddie Mac has always been controversial for many decades. But there is no consensus on what types of government agencies should replace them. Many housing experts say that Trump should take a very strong look at how to get more private capital back into the mortgage markets. They say that there need to be strong alternatives to Fannie Mae and Freddie Mac. We anticipate that FHA-programs will remain aggressive with credit and accessibility. Many bankers have rolled out no doc mortgage loans for people that meet the lending standards
#3 Make Affordability Connected to Mobility
For many home buyers today, one’s zip code will determine how economically mobile they are. This means that almost 50% of people who are currently renting are having a difficult time paying their rent. Meanwhile, about 25% of them are having severe problems paying rent.
Also, only about one out of four people who are supposed to get federal subsidies ever get them. Some experts believe that Trump will be able to help the housing market by boosting the subsidies to many of the households who need them the most. This will help them to move into better communities that are closing to better jobs and better schools.
#4 Boost Building
Housing experts also contend that boosting building in many communities is needed to improve the housing market. By providing more good housing stock in many areas of the US, this will reduce prices and will spur demand and job growth.
Also, there will need to be more spending on infrastructure and transit to make certain that these new neighborhoods are able to grow and expand so that they are not too isolated from major services. Experts think that some of the gridlock in Washington DC in recent years has prevented the federal government from spending enough money on essential infrastructure.
#5 Keep the Rust Belt in Mind
One of the biggest things that Trump can do to revive the housing market is to keep the Rust Belt in mind. What he should remember is that many towns in middle America are dealing with foreclosures and downturns that were not due to over exuberance or recklessness in the housing boom. Rather, there has been major job loss and decline in the industrial base as more jobs have move off shore and to the southern
US. New home buyers may not be excited about buying homes in neighborhoods with many foreclosures. However, perhaps if the Trump administration prioritizes investment into these long neglected communities, home-ownership can increase in these areas.
#6 Keep the Housing Market Stable
Some experts think that because Trump won, he is a largely unknown quantity when it comes to the real estate market, even with all of his experience in apartments and many types of business buildings. Some believe it would make sense for Trump to not do anything dramatic in his first year in office so that the markets are not roiled. The real estate market does not like to see uncertainty, and Trump could represent uncertainty for some people in the market. It will be interesting to see if more no down payment mortgage programs will be rolled out in 2017 and 2018.
Given that Trump is generally believed to be a more pro-business person than Hillary Clinton, experts largely think that he could be good for the housing market, at least in the medium to long term. Of course, this remains to be seen, but the stock market soared the following weeks after the election and several recent housing surveys indicate a positive outlook for 2017. When he first enters office, there could be some trepidation in the housing market until there is a clearer understanding of what Trump is planning. But with his experience in the real estate business, it is likely that his term in office could be good for the real estate industry.