For Realtors, attorneys, mortgage brokers, investors, and developers, the past year’s real estate market has likely brought a desire to move beyond the hurdles of low supply, strong demand, and elevated interest rates. Meanwhile, home buyers have been outspoken about soaring prices and high interest rates, which have made it challenging for many average Americans to purchase their first home. Consequently, real estate remains one of the few sectors where inflation is persistently high.

Many in the real estate industry are excited about Donald Trump’s victory in the 2024 presidential election, particularly hopeful about his administration’s potential to improve the real estate market, particularly by keeping interest rates down.  The Fed’s recent 25-basis-point rate cut follows a surge in mortgage rates, which recently climbed above 6.5%.

However, the real estate market could face certain impacts stemming from the broader policies of Trump 2.0, and real estate professionals should be prepared. Here are a few key points to consider:

Interest Rates

While lower interest rates typically lead to higher real estate prices, they would be a welcome relief for prospective homebuyers who are otherwise priced out of today’s market.  Furthermore, deregulation, particularly in the mortgage market, would encourage potential homebuyers to move off the sidelines and become more active in the marketplace.  Professionals serving their clients should assess the impact of mortgage market deregulation and the push to lower interest rates under a pro-industry administration, aiming to attract more qualified buyers into the market while managing expectations in what is likely to be a high-price real estate environment.

Tax Policies

There are concerns that Trump’s tax policies and tariffs could drive up deficits and fuel inflation.   It’s hard to get away from the fact that many materials used to make everything in our country, let alone real estate – are imported from other countries, especially China. Cost of materials to build and maintain real estate would go up, which may lower affordability for home buyers to buy houses, particularly new homes.

Additionally, President-elect Trump will probably extend the Tax Cuts and Jobs Act, which would also extend the cap on state and local tax (SALT), making it less likely you’ll receive a full tax benefit for interest payments on your mortgage at tax time.  Some states have enacted legislation to thwart this for some, but home affordability would be that much more difficult, writ-large.  Real estate pros should take note of a softening new construction market that may be afoot, especially if these proposed tariffs and mass-deportation policies are enacted (which we’ll discuss in the next section.)

Immigration Policies

Trump’s commitment to mass deportations raises serious concerns. Deporting 10 million people would be enormously costly and complex, with potentially devastating effects on the economy, particularly the construction industry. Mass deportations would likely drive inflation up, strain essential services, and increase the risk of a recession.

In general, the country needs more workers, and immigration is essential to meet this demand. People often come here illegally because job opportunities are available.  The lack of workers in the construction industry would wreak havoc on new construction sales, driving up prices and time it takes to build a new home.

To counterbalance this, developers and investors may consider next-generation building methods, such as modern modular and 3D home construction, which significantly reduce the time required for building homes. Factory-built homes require less labor from unskilled workers and reduce reliance on immigrants to fill construction roles.

The Bottom Line

Despite the Trump administration’s policies that may intensify persistent inflation in real estate, a push for lower interest rates and mortgage market deregulation suggests that 2025 could be a strong year for the industry. While home prices are likely to keep rising, continuing the trend of unaffordability for many due to supply shortages, transaction volume is expected to grow year-over-year. Although it’s too early to predict how a Trump-led DOJ would handle broker compensation as a result of the NAR anti-trust settlement, there’s a widespread expectation of a more industry-friendly approach. With increased market activity, Realtors and other real estate professionals are well-positioned to gain a larger share of deals—addressing one of last year’s common complaints about the market.