Since Donald Trump was elected, we've all been speculating about what kind of president he will be. His recent claim that "the president of the United States is allowed to have whatever conflicts he wants" makes the answer fairly clear — Trump will be president for himself.
And that's not necessarily a bad thing for the housing market.
Sure, Trump could be president for all Americans, as he promised in his victory speech, but this is a most unlikely scenario. However, should he decide to focus on making policy decisions that are good for the entire country, we would probably see regulatory efforts like Dodd-Frank and the Consumer Financial Protection Bureau remain in place. We could see greater emphasis on affordable housing, but overall, there would be little change for the housing market.
It's also possible that Trump will be president for his supporters, which would be more in line with the Trump we saw on the campaign trail. If he puts his words into action, it could significantly impact the housing market, for better or worse. For example, homebuilders rely on many of the undocumented immigrants Trump has promised to deport. If he follows through, builders will struggle to find workers. Labor costs will soar and so will home prices.
At the same time, Trump's pledge to deregulate the market and lower taxes could be a boon for the economy, creating increased housing demand which would further escalate the rise in home prices. This effect could vary geographically.
People in red states may have more confidence in Trump's ability to improve the economy, and thus may be more likely to make a major purchase like a new home. Conversely, those in blue states may resist buying homes until the impact of a Trump presidency becomes clearer. There is even evidence that people from blue states are buying more real estate in red states to take advantage of a perceived higher consumer confidence there.
If Trump goes too far in rolling back regulations like Dodd-Frank, it could possibly lead to another housing crisis. Furthermore, many banks and mortgage lenders have expended significant resources on compliance. While many of us in the industry feel that facets of Dodd-Frank are overreaching, removing these regulations entirely would be both costly and risky.
But based on his recent rhetoric, including his claim that he can run the country and his business "perfectly" at the same time, Trump is most likely to be president for himself — a businessman first and our national leader second. Because his real estate empire depends on a strong economy, his policy would be closely tied to his business interests.
So it's hard to imagine, for instance, that Trump would act on his promise to deport millions of undocumented immigrants, many of whom provide the cheap labor necessary to build his towers and hotels.
Businessman Trump would likely roll back many of the Dodd-Frank restrictions that have put pressure on smaller banks, which would increase lending activity. This, together with the decreased costs of compliance, would boost profits for banks, which would allow them to develop more lending products to meet the needs of more borrowers. And looser underwriting standards would give more people the opportunity to get a mortgage.
If Trump follows through on his pledge to lower taxes (again, good for his businesses), it would create more spending power for Americans and also help attract more businesses from overseas, creating more jobs. All this would lead to a greater demand for homes and mortgages.
On the downside, of course, higher demand coupled with looser regulations could lead us to another housing crisis. And a growing economy could result in higher inflation, which would lead to rising mortgage interest rates. History has shown us, however, that in a strong economy, people will still buy homes despite higher rates.
Of course, there's no guarantee that "president for himself" is the Trump we'll get. His rhetoric has seemed to change daily. He campaigned on a promise to "drain the swamp" of Washington career politicians but has already appointed several Washington and GOP insiders to his team. He threatened to prosecute Hillary Clinton, but has since called the Clintons "good people." And the wall along the Mexican border now looks more like a fence.
But the bottom line is this: Trump is a businessman and a real estate mogul who will naturally lean toward policies that strengthen his hand. And as long as he doesn't put the economy in jeopardy by going too far with de-regulation, a Trump presidency could be very good for the housing industry.
Keith Canter is the CEO of First Community Mortgage in Murfreesboro, Tenn.