How the Trump Win Will Affect Real Estate

42421196 - residential house and a bank card are on white background.Interest Rates Rise Following Election

We explored how the residential market might fare under the new President’s administration (How the Housing Market Will Fare Under Either Presidential Candidate, Nov. 8). What we have already seen, however, is a rise in mortgage interest rates — though they remain under 4%. Why?

According to Business Insider, (The housing market is suddenly losing one of its biggest drivers, Nov. 19):

“It all started after President-elect Donald Trump won the US election.

One of Trump’s big plans is a fiscal-spending splurge: big investments in infrastructure, and cuts to the US’ towering corporate tax rates.

This plan could jump start growth and inflation, and it’s the latter that rocked mortgage rates. Higher inflation expectations triggered a sell-off in bonds, which push up interest rates when they fall.”

Meanwhile, Janet Yellen has indicated to Congress that interest rates could be raised soon. The chairwoman of the Federal Reserve said  on Thursday that an interest rate hike “could well become appropriate relatively soon” (Fox Business, Nov. 18).

It is good news for homebuyers at this time: rates remain below 4%, and the real estate market remains healthy with housing starts hitting a nine year high this October (Bloomberg, Nov. 17). But with rates likely to rise soon, homebuyers may have less to spend for their homes come spring.

In commercial real estate news, Marcus & Millichap published their report on the election, and the news was largely positive. “The news was largely positive.

On the plus side, Marcus & Millichap said that the U.S. economy should continue to grow as the new president takes office. As the company says, the U.S. economy is now in its seventh year of a durable but moderate expansion. Marcus & Millichap says that 2 million to 2.5 million new jobs should be added during the next year. The country currently has an unemployment rate of 5 percent and 5.5 million unfilled job openings.

Marcus & Millichap predicts that unless an unexpected surprise hits the country, the economy will continue to grow, something that will result in an increase in commercial real estate construction, leases and sales” (Trump won. What does that mean for commercial real estate? Dan Rafter, Nov. 16).

However, the report also anticipates the rise in interest rates. “Marcus & Millichap says that faster economic growth could result in inflationary pressure, pushing interest rates higher. Mortgage interest rates have already jumped following Trump’s election, with many economists predicting that the average interest rate on a 30-year, fixed-rate mortgage loan might soon hit 4 percent.”

 

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New Developments in Home Mortgages and Highland Park Real Estate

Real Estate Week in Review

Local News

New developments are coming in Highland Park real estate, including new plans on- and off-street parking at the Ford site to encourage growth and ease congestion. Also, the city council has denied an attempt by neighbors to block the 735 Cleveland Ave building, a 4-story new construction site. No zoning changes or variances has been required (Highland Villager). Stay tuned to the Miller Grossman website for updates on these and other projects.

A new real estate venture, Stadium Partners LLC, has purchased Hubert’s Cafe and Sports Bar near the Vikings stadium, the first example of stadium fueled development (MSP Business Journal, June 5). The venture is planning cosmetic tweaks and a new name: the original Hubert’s.

Hillcrest has sold 6 northeast Minneapolis developments (Business Journal, June 4). The portfolio includes Crown Center, home to Blu Dot Furniture and Bauhaus Brew Labs; Frost Building, home to Dogwood Coffee Co.; and the renovated 1515 Central Ave, home to Sociable Cider Werks.

National News

It was announced on Thursday that the US has added 1 million new jobs since the start of the year, including 280,000 in May (CNN Money, June 5), and 3 million new jobs over the last 3 years (Associated Press, June 5). “It’s timely progress for the economy as the Federal Reserve board meets on June 17. The Fed is widely expected not to raise its main interest rate in June, but Fed Chair Janet Yellen will speak to the press and offer her outlook on the economy. If conditions continue to improve, interest rates could rise for the first time in about a decade — another healthy sign for America’s economy” (CNN Money).

“Those additional paychecks helped increase spending on housing” — through the first four months of this year, new construction home sales have gone up 23.7% compared to this time last year, illustrating a continuing demand for homes (AP).

Also in national news, the Supreme Court on Monday determined that homeowners who are underwater on their mortgage cannot void a second loan (Associated Press, June 1). This means, even if the home isn’t worth what they owe on the primary mortgage, bankrupt homeowners cannot “strip off” a second loan.

Finally, US Regulators are warning that many ads regarding reverse home mortgages are misleading, and “don’t tell the whole story.” Read more here.