How the New Presidency May Affect Home Buying in 2025
The mortgage process in 2025 may be more streamlined than ever, but it’s still important to know all the angles so you can be confident you’re getting the best deal for your situation. By getting pre-approved, understanding your loan options, and budgeting for closing costs, you can avoid the most common mortgage mistakes and set yourself up for success. Working with an experienced mortgage professional can also provide the guidance and expertise needed to navigate the process confidently.
The inauguration of a new presidential administration often brings changes that can influence various sectors, including the housing market. As we move into 2025 under President Donald Trump's leadership, prospective homebuyers may wonder how new policies and economic strategies could impact their plans. This article explores potential effects on home buying in 2025, considering factors such as mortgage rates, housing affordability, and market dynamics.
Mortgage Rates and Economic Policies
During his campaign, President Trump promised to reduce home loan interest rates to 3% or lower. However, according to Realtor.com, mortgage rates are projected to average 6.3% across 2025, ending the year at 6.2%. This is a slight decrease from the 6.7% average expected across 2024 but still above the 4% historical average recorded from 2013 to 2019. It's important to note that presidents have limited direct control over mortgage rates, which are influenced by broader economic factors and trends in the bond market.
Privatization of Fannie Mae and Freddie Mac
One significant policy consideration is the potential privatization of government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac. These entities play a crucial role in the U.S. housing market by setting lending standards and handling a substantial portion of residential mortgages. Privatization could lead to higher mortgage rates and market disruptions, as the current federal backing minimizes credit risk, essential for maintaining lower rates. The transition would be complex and contentious, with significant political and economic obstacles.
However, privatization of these companies could lead to enhanced market competition. This could lead to more competition, encouraging private financial institutions to develop innovative mortgage products and services. It also could lead to a more competitive environment and could lead to a wider range of mortgage options, potentially benefiting borrowers with diverse needs.
Housing Affordability and Supply
President Trump's proposals to address housing shortages include cutting regulations for homebuilders and opening up federal land for construction. Estimates suggest that regulatory costs contribute more than $90,000 to the price of a new home. Reducing these costs could encourage new-home construction, potentially easing supply constraints.
Market Dynamics Post-Election
Historically, home sales tend to increase in the year following a presidential election. Data from the Department of Housing and Urban Development (HUD) and the National Association of Realtors (NAR) show that after 9 of the last 11 presidential elections, home sales rose the following year. This trend is attributed to stabilized economic policies and renewed buyer confidence. For instance, total home sales in 2024 are estimated to be around 4.6 million, with predictions pointing to a rise to 5.2 million in 2025.
As 2025 unfolds under the new administration, prospective homebuyers should stay informed about policy changes and economic indicators that could influence the housing market (or, reach out to mortgage professionals like us and we can keep you in the loop). While certain proposals may aim to improve housing affordability and supply, other factors could counteract these benefits. Staying updated and consulting with real estate professionals can help navigate the evolving landscape and make informed home-buying decisions.
