Contributing Columnist Michael Greenwald - The Trump Impact on Real Estate
Much like the rest of the country, the real estate industry is trying to figure out how it will be affected by the Trump presidency. Noting that Trump is a life-long real estate mogul from a real estate family, one might surmise that his presidency would benefit the real estate market. However, the effects of his proposed policies combined with other economic factors are still unclear. The real estate industry seems most focused on the effect of deregulation and the repeal of Dodd-Frank, the possibility of significant infrastructure spending and related job growth, as well as the direction of interest rates.
The President has taken the first step, signing an executive order rolling back the 2010 Dodd-Frank financial-overhaul law, in a sweeping plan to dismantle much of the regulatory system put in place after the financial crisis of 2008. During a Strategy and Policy Forum, Trump stated, “Frankly I have so many people, friends of mine, that have nice businesses and they can’t borrow money. They just can’t get any money because the banks just won’t let them borrow because of the rules and regulations in Dodd-Frank.” Like others in the Republican Party, Trump believes the banking reform is hindering lending, stifling growth, and harming the economy. On the other hand, eData from the Federal Reserve indicates that commercial lending in general and lending for commercial real estate are at higher levels now than before the 2008 financial crisis. And according to some economists, more stringent lending requirements for residential mortgages have helped to strengthen the housing market.
The stock market is already reacting to the President’s executive order, reducing the burden of regulations and expediting high priority energy and infrastructure projects that will create jobs, including the Dakota Access and Keystone XL pipelines. Mining, steel, engineering, construction companies and others also expect to benefit from the anticipated construction boom.
Although the Fed is currently keeping interest rates steady, expectations for economic growth from President Trump’s proposed policies have introduced a greater uncertainty about the direction of the economy--leading to a muddled interest rate market. The President’s plan to cut individual and corporate tax rates, along with increased infrastructure spending, could spark economic growth but could also prove inflationary. On the other hand, the President’s proposal for import tariffs could have the opposite effect on inflation, the value of the dollar, and interest rates.
Ultimately, Trump's impact will depend upon his ability to formulate policies and successfully persuade Congress to enact them. With Republican control of the House and Senate, it will be easier for him than for some recent presidents. For the moment, Trump’s direction is unclear and Congress and the president do not appear to have identical priorities. Though Trump brings a high level of uncertainty to the presidency and the real estate industry, this is a market he knows well. Time will tell whether his policies and real estate know-how will ultimately have a positive or negative impact.