Trump to Tackle Housing Crisis in 2025 Amid High Prices and Mortgage Rates

As President-elect Donald Trump prepares to enter office, he will inherit a housing market burdened by high home prices and elevated interest rates. Unlike during his first term, affordability has worsened significantly, with soaring prices and rising mortgage rates leaving many potential buyers struggling.

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Slower Housing Market Activity and Rising Mortgage Costs

Homebuyers and sellers alike are feeling the pinch as affordability continues to decline. The average 30-year fixed mortgage rate has climbed above 7%, up from around 4.09% at the beginning of Trump's first term. For families purchasing a $400,000 home, this means an additional $594 per month in mortgage payments compared to 2017.

Meanwhile, the median home price in the United States has surged to $420,400, a 35% increase since 2017. This price jump has made it harder for buyers to find homes within their budget.

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Trump’s Housing Proposals and the Risk of Inflation

The incoming administration has outlined plans to address housing affordability by reducing mortgage rates and home prices. Key strategies include mass deportations of undocumented immigrants and loosening federal regulations on building and land use. However, housing experts argue that these measures could backfire and exacerbate existing problems.

Mark Zandi, chief economist at Moody’s Analytics, pointed out that Trump's approach, including higher tariffs and tax cuts, could lead to further inflation, which would make it even harder to reduce mortgage rates.

Tariffs and Labor Shortages Could Drive Up Construction Costs

Trump’s plan to impose 25% tariffs on imports from Canada and Mexico, and 10% tariffs on Chinese imports, has raised concerns among economists. The housing industry relies on materials from these countries, and tariffs could drive up construction costs even further.

The National Association of Homebuilders estimates that 7% of residential construction materials were imported in 2023, with significant imports coming from Canada, Mexico, and China. These tariffs could push up the costs of wood, plaster, and appliances.

Impact of Immigration Policies on Housing Supply

Trump’s focus on mass deportations is another area of concern. While the intention is to reduce housing demand by removing undocumented immigrants, many economists warn that such policies could backfire. Immigrants make up a large portion of the labor force in construction, with nearly a third of construction workers being foreign-born. In states like California, the figure is even higher, with immigrants accounting for 41% of the workforce.

Removing these workers could make it even harder to meet the growing demand for housing, further straining an already tight housing supply.

Higher Costs for Builders and Buyers

The combination of higher tariffs, labor shortages, and other economic factors could lead to a rise in construction costs. This will likely translate into higher prices for new homes, which could drive up mortgage rates and make homeownership even less attainable for many Americans.

As the economy adjusts to Trump's proposed policies, the Federal Reserve may be forced to keep interest rates higher for longer, making mortgage loans even more expensive for prospective homebuyers.

In the coming years, Trump’s policies will have a profound impact on the housing market. While the administration aims to reduce home prices and mortgage rates, experts believe that the combination of inflationary pressures, higher construction costs, and labor shortages could present significant challenges in making housing more affordable.