Friday, January 20, 2017

New Administration in Washington, What of our Industry?

Alex Wong/Getty Images
At noon today Eastern Time just a little while ago, the 45th President of the United States was inaugurated. What will this mean for the real estate industry? Will it be good? Bad? Indifferent? Well could go either way really.

Most industry analysts feel that President Trump will move to soften some of the regulatory portions of the Dodd-Frank law that created a number of positive protections but also has allowed for problems with lending that has excluded many Americans from getting a home.

The President should use caution when making these changes, but if we can get appraisal companies to conform to better practises to help end the outrageous gouging and poor service that has resulted in the aftermath of the Dodd-Frank rules, that will be a great benefit to our industry.

If our new President's policies lead to a stronger overall economy there will be increased pressure on interest rates. This will lead to a higher cost of home ownership and that could cause some slowdowns in both price appreciation and the number of eligible buyers in the marketplace.

I would caution buyers from thinking that a softening price condition with higher rates is good for the long term. it is not. Paying $300,000 for a home at 4% is better than paying $280,000 for the same house at 5% unless one plans to live in the house for less than five years. As an important note, I do not see a softening in actual price but like most industry experts are saying, I see a slowdown in the rate of price growth. It is double jeopardy for buyers on the edge of the bubble as prices may not rise as fast in 2017 they will probably still rise. Rising rates are ultimately the bigger threat to affordability and that appears to be the direction for 2017 as well.

The bottom line is that buyers need to get off the fence and jump into a purchase before the market yanks them off on the renter side.

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