The housing market has long been shaped by the push and pull of federal policies, and deregulation is a key theme whenever discussions of economic reform arise.

With Donald Trump’s anticipated focus on deregulation in his 2024 presidential campaign, the question becomes: Will his approach stimulate real estate investment, or could it create new risks for homeowners and the broader housing market?

This article explores the potential impact of Trump’s deregulation policies, diving into how they might affect housing prices, mortgage rates, and new home construction.

A Return to Deregulation: Trump’s Proposed Policies

Trump’s focus on cutting back regulations is not new—during his previous administration, he emphasized reducing federal oversight across industries. In real estate, this meant easing building and environmental restrictions, which sped up new developments and reduced construction costs.

Should Trump return to the White House in 2024, experts believe he’ll double down on deregulation efforts to stimulate the economy. Marty Harlee, Senior Consultant at First Trust Financial, explains: “A more relaxed regulatory environment lowers barriers for developers, which will increase the supply of housing. In the short term, this can keep home prices stable or even reduce them.”

Trump has also proposed revisiting financial regulations on lending institutions, making it easier for banks to approve mortgages and lines of credit. This might mean expanded access to home loans—a positive for buyers struggling to qualify under tighter regulations. However, critics argue that loosening lending rules could increase the risk of defaults, similar to what occurred during the 2008 financial crisis.

The Housing Market During Trump’s Last Presidency

Trump’s previous term (2017-2021) saw the housing market boom, thanks to low mortgage rates, tax cuts, and fewer regulations. Buyers rushed into the market to take advantage of the favorable conditions, while homeowners cashed in on equity by refinancing. Here’s a breakdown of how the housing market looked under Trump’s administration and what drove its growth.

• Low Interest Rates: Mortgage rates steadily dropped, starting at 4.03% in 2017 and hitting 3.11% in 2020. This spurred a wave of refinancing and gave buyers the confidence to take on new loans.
• Refinance Boom: With rates so low, many homeowners refinanced their mortgages to lower their monthly payments or pull equity for other expenses.
• Tax Cuts Boosted Disposable Income: The Tax Cuts and Jobs Act of 2017 put more money in people’s pockets by reducing income taxes. While it capped mortgage interest deductions, the doubled standard deduction made it easier for many buyers to manage their finances.
• Increased Home Prices: High demand, paired with tight inventory, pushed up home prices—by the end of Trump’s term, the median home price had risen by nearly 30%.
• Deregulation Helped Developers: Trump’s focus on cutting red tape made it easier and cheaper for builders to construct new homes, although inventory still lagged behind demand.
• COVID-19 Impact: Even with the uncertainty of the pandemic, the housing market remained resilient. The demand for homes soared as people sought more space, taking advantage of low borrowing costs.

Here’s a quick snapshot of some key trends during Trump’s presidency:

Housing Market Snapshot (2017-2020)

Trump’s term was a mix of opportunities and challenges for buyers and sellers:

• Opportunities: The low rates gave buyers access to affordable loans, and homeowners could refinance to cut costs.
• Challenges: The surge in demand led to higher home prices, making it tougher for first-time buyers to enter the market.

Marty Harlee, a senior consultant at First Trust Financial, summed it up: “Trump’s tax cuts and deregulation made it easier for homebuyers, but inventory still couldn’t keep up with demand.”

Whether another Trump presidency would bring similar benefits remains to be seen, but the trends from his last term suggest that looser regulations and lower borrowing costs could again boost the housing market—though affordability issues might still persist.

How Could Deregulation Impact the Housing Market?

While Trump’s policies may offer a boost to the real estate market, there are also potential risks. Here’s a closer look at the benefits and challenges.

Benefits:

• More Housing Inventory: Easing zoning and building restrictions could encourage more development, leading to increased housing supply. This might alleviate inventory shortages in high-demand areas like Texas and Florida.
• Lower Construction Costs: Developers can cut costs by bypassing certain regulations, making homes more affordable.
• Increased Access to Mortgages: Looser lending standards may give more buyers the ability to enter the market, particularly those with non-traditional income sources.

Risks:

• Overbuilding in Certain Markets: Rapid development might result in oversupply, which could depress home prices.
• Riskier Loans: If lenders reduce their credit requirements too much, buyers who aren’t financially prepared could end up defaulting.
• Environmental Concerns: Some communities worry that rolling back environmental protections will lead to unchecked development and long-term consequences.

Potential Risks of Trump’s Deregulation for the Housing Market

While deregulation offers many benefits, such as encouraging development and reducing costs, it also carries potential risks. The relaxed rules could lead to unregulated lending practices, environmental concerns, and housing market volatility.

In the past, deregulation in financial sectors has sometimes resulted in bubbles and market crashes. The possibility of relaxed lending standards under Trump could introduce similar risks if borrowers or lenders overextend themselves.

Impact of Deregulation: Pros and Cons Overview

Deregulation offers opportunities for growth by lowering costs and increasing access to credit. However, it also introduces potential risks like market instability and inadequate affordable housing. Striking the right balance between deregulation and consumer protection will be crucial for maintaining a healthy real estate market.

Market Snapshot: Current Housing Trends

The housing market in 2024 is experiencing a mixture of challenges and opportunities. Here’s a quick look at some key metrics influencing the conversation around deregulation:

With inventory still tight and prices rising, many industry insiders believe that deregulation could ease the pressure by allowing developers to build more homes faster and more affordably.

The Role of Interest Rates and Lending Regulations

If Trump moves to reduce lending regulations, interest rates could be indirectly impacted. While the Federal Reserve sets rates, Trump’s influence over financial policy might encourage looser lending practices, which could lead to increased refinancing activity and more affordable mortgages.

According to Dennis Shirshikov, Chief Economist at Granite Ridge Lending, “Loosening lending rules could stimulate home sales in the short term, but there’s a risk we could see higher default rates down the line. Buyers need to be careful not to overextend themselves, even if loans are easier to get.”

Additionally, the Down Payment Toward Equity Act, which is currently being debated, may align with Trump’s efforts to improve market accessibility by increasing financial assistance for first-time and disadvantaged homebuyers. If passed alongside deregulation, this act could open the door for even more buyers to enter the market.

Table: Impact of Deregulation on Key Housing Market Factors

Could Deregulation Lead to a Housing Bubble?

One major concern with Trump’s deregulation push is the possibility of creating a housing bubble. If too many buyers enter the market with risky loans, demand could surge artificially, pushing prices even higher. A sudden correction could then trigger foreclosures and defaults. Shirshikov warns, “It’s important to learn from the past. If lenders loosen credit too much, we could be looking at a repeat of 2008.”

However, others are more optimistic. “The housing market today is stronger and more stable than it was before the last crash,” says Harlee. “Regulatory rollbacks—if done carefully—could encourage sustainable growth.”

FAQs About Trump’s Deregulation and the Housing Market

How will Trump’s deregulation policies impact mortgage rates?

Trump’s policies could increase lending flexibility, which may lead to more refinancing activity. However, the Federal Reserve still controls the primary interest rates, so the effect might be indirect.

Will deregulation result in lower housing prices?

In the short term, increased inventory from deregulation could stabilize or reduce prices. However, too much supply could cause a temporary drop followed by market corrections.

What risks do buyers face under deregulated lending rules?

Buyers might face easier loan approvals but could risk overextending financially, leading to defaults if their income or market conditions change.

What environmental concerns come with deregulation?

Communities worry that rolling back environmental protections could lead to unchecked development, potentially causing long-term ecological harm.

How could deregulation affect first-time buyers?

If paired with programs like the Down Payment Toward Equity Act, deregulation could help more first-time buyers enter the market by increasing access to affordable loans.

Could deregulation increase foreclosures?

If lenders approve loans for unqualified buyers, the market could see an uptick in defaults and foreclosures, similar to what happened in 2008.

Will new home construction surge under deregulation?

Yes, fewer restrictions could encourage more development, especially in high-demand areas. However, developers need to be cautious about oversupply.

Is now a good time to buy with potential deregulation on the horizon?

It depends on your financial situation. If you’re ready to buy, locking in a mortgage before market uncertainty sets in could be wise. But waiting for deregulation could offer better terms if you can be patient.

Conclusion

Trump’s push for deregulation in the housing market presents both opportunities and challenges. While it could encourage development, reduce housing costs, and expand access to loans, it also introduces risks, such as oversupply, risky lending practices, and environmental concerns. The success of these policies will depend on how carefully they are implemented and how well the market adapts to the changes.

For buyers and sellers, staying informed about both federal policies and market trends is essential. As the 2024 election approaches, the real estate market will be closely watching to see if Trump’s vision for a deregulated economy becomes reality—and whether it delivers the promised boost or introduces new risks.