How Trump Policies Will Affect the Housing Market in the Great Lakes Region

November 15, 2024

The new President, being from a real estate background himself is generally viewed
favorably by the industry. However, let’s have a look at what impact his policies might
have on the supply, demand, and overall prices and rents in the Great Lakes region.

Inflation

Donald Trump‘s key economic policy revolves around tariffs on imports, in order to promote
American-made products, and so this should help the manufacturing base in cities like Buffalo, and across Ohio and Pennsylvania. Creating jobs creates demand for local labor. Halting illegal immigration reduces supply. The result will be real wage inflation, similar to what happened in 2016 and part of the reason for the overall feelgood factor during Trump’s first term in office.

Wage inflation is great for the population and is great for landlords overall. People have more money in their pockets, and rents can increase, although the cost of goods will also increase. This and the more expensive labor mean the cost of building and rehabbing homes goes up, but so do the values of the homes to compensate. Cost increases always drill down to the end consumer – the buyer or
the tenant.

The big bonus here though is that the value of your mortgage will fall in real terms as inflation eats away at the real value of the debt (while your rent increases).

Tax breaks for first-time buyers

Both Harris and Trump have suggested doing this. Realistically I consider this a gimmick and I doubt it’ll do much to move any needles. House prices will be rising, and the extra demand this creates will push values higher still. In a Great Lakes region context, there are plenty of houses that are within budget for first time buyers that are also in the rental sweet spot so it could push the lower end of the market up. One benefit of rising prices is that it may push up the areas that are still not ‘mortgageable’ i.e. values are below $90k over that, which will create a great positive momentum in these neighborhoods (i.e. Toledo, Akron, South Syracuse).

Opening Federal Land and reducing regulations

It’s not yet clear how Trump’s team will be able to reduce regulation here to allow more houses to be built, but if more houses can be built easily to reduce the shortage of homes, then they will be.

Stopping illegal Immigration

As anyone who visits Home Depot can testify, Illegal immigrants often find themselves working in the construction industry. It’s not yet clear what the fate will be of the non-criminal element (I suspect if they’re already here and working they’ll be simply given a pathway to citizenship). If as a worst-case scenario, we expect the numbers to go down then common sense economics tells us that there will be a
shortage of construction workers, which will again push the cost of new housing up. On the other side, deportations will lead to less demand for lower-end housing. My estimate here is that while new arrivals will be sharply cut, active deportations will be limited to criminals, so the effect will be slow and less than the media thinks.

Elon Musk and the ‘DOGE’ – Department of Government Efficiency

This at first glance might seem like it’s going to be shredding jobs, but generally these jobs are in the beltway rather than the rustbelt, where government workers tend to be policemen firemen and in city hall. The bigger picture could be a solvent USA which is plainly a good thing for any business here but the direct effect on landlords in the rustbelt isn’t expected to be much.

Interest Rates, Rents, House Prices and General Roundup

Trump intends to reduce interest rates and the nominally independent central bank indeed has indicated that’s the intention, but both tariffs and sharply reducing immigration is inflationary, so unless productivity increases quickly (and with wildcards like AI there is speculation about this) something will have to give. Although Trump has put too many war hawks in his cabinet for my liking, the chances of WW3 have fallen, given his track record from 2016 to 2020.

We as landlords benefit from the best parts of inflation – home prices, salaries and rents increasing, but we also benefit from lower interest rates and the Federal Reserve will be under pressure to pivot to either slow the reduction in rates and/or end the cycle of reducing rates earlier.

Our best case is moderate inflation, with gently rising prices and rents coming from steady demand for budget housing and lack of supply. If inflation falls, rates fall and it’s still not bad. World peace and a balanced budget will go a long way to avoid any worst-case scenarios.