Monday, November 28, 2016

Possible Policy Impacts on Housing

by Bill McBride on 11/28/2016 03:44:00 PM

On Friday I posted a few 2017 housing forecasts. I'll add more forecasts soon. Some of these forecasts may be revised due to the Presidential results and also due to the possibility of higher mortgage rates.

Here are some preliminary thoughts on several potential issues for housing over the next couple of years:

1) Higher interest rates due to policy changes (tax cuts and more spending).  Higher mortgage rates could slow housing activity.  However, if the tax cuts and more spending lead to more jobs, then that might offset any increase in mortgage rates.

2) Immigration.  If the next administration focuses on deportation, this could lead to less demand in certain areas.  This could lead to lower rents, fewer sales, more inventory, fewer housing starts, and possibly lower prices in those areas.

3) Financing.  Although most policy discussions have focused on deregulation, it is also possible that Fannie and Freddie will be privatized, and that some mortgage lending will dry up.   FHA loans might also become more expensive.