Donald Trump becomes the President-elect just ahead of the Federal Reserve’s November meeting on Thursday. Middleburg Communities chief economist Brad Case joins Catalysts Hosts Seana Smith and Madison Mills to look at what Trump’s win means for the housing market and housing affordability. Case says the economy “has been strong and resilient for several years, and it’s still, I think, too strong to justify significant rate cuts. However, the FOMC members have said that they do think rates should be lower. So it’s possible that they will continue lowering rates but make but increase their quantitative tightening policy, their balance sheet management, which will really have the same result as tightening rates in terms of pulling back on consumption and in particular investment.” The economist says there are four components to consider when addressing housing affordability issues: building costs, labor costs, financing costs, and operating costs, specifically insurance, for those with rental properties. Case notes that financing costs are “what the Fed affects most directly,” but reigniting inflation could raise costs for all components. Case says he expects housing costs to rise under Trump, adding if they don’t “they’re so inflated right now.” He explains, “The way to get out of [the affordability problem] is to increase supply, but of course, that could have the effect of reducing house prices. And if people who are thinking about buying a house are concerned that the value of their asset may go down, then that may actually cause the value of the house to go down. So that’s a that’s a risk going ahead.” The economist notes that it’s largely up to local and state governments to address housing affordability rather than federal-level entities like the president or the Fed.
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