President-elect Donald Trump faces a much different housing market than the red-hot one he enjoyed during his first term. Adding to this potential dilemma is Trump’s own agenda, which economists warn could make things much worse for home buyers.

When Trump left office in January 2021 during the teeth of the COVID-19 pandemic, the 30-year fixed mortgage rate was just below 2.8%. It’s now about 7%, which means Americans who take out a mortgage must now fork over hundreds or thousands of dollars more per month, in some cases, than if they’d bought a house for the same price four years ago.

Worse, home prices have risen significantly between January 2021 through October 2024, increasing 37%, according to the S&P CoreLogic Case-Shiller Home Price Index.

Analysts are skeptical that Trump, who didn’t say much during the campaign about housing policies, will impact the market enough to noticeably drive down prices.

“I see very little reason the housing market will get better this year,” Jim Parrott, a nonresident fellow at the Urban Institute, told CNN recently.

The Trump transition team doesn’t agree.

“President Trump will deliver on his promise to Make Housing Affordable Again by defeating historic inflation and reducing the mortgage rate,” said Taylor Rogers, a spokesperson for the Trump team.

Rogers cited Trump’s push to deport millions of illegal aliens, who he says are driving up housing costs. He also mentioned a focus on deregulating the housing industry.

However, there are several speed bumps in Trump’s way, including aspects of his own agenda.

Slashing regulations is easier said than done

Regulations account for about $93,870 of a home’s final price, according to a 2021 study by the National Association of Home Builders. Of that price, about $41,330 goes toward regulations during the development phase of a home, while more than $52,000 is attributed to construction. At the time of the study, the average price of a new home was more than $390,000.

For Trump, limiting these costs is challenging because many of them come from local laws. When Trump was president, he and his then-Housing and Urban Development Secretary Ben Carson promised to back local single-family zoning laws, which analysts argue act as a stumbling block for new home construction.

“It would be a terrible mistake to put the federal government in charge of local decisions — from zoning and planning to schools,” Trump and Carson wrote in a 2020 Wall Street Journal editorial. “Our Founders understood this was the path to tyranny.”

The new incoming administration could find some movement in other areas. For instance, the Inflation Reduction Act included $1 billion in grants to state and local governments to adopt updated energy codes that are restrictive, the National Association of Home Builders said.

In a memo to Congress in 2023, the NAHB cited this IRA provision as an “excessive regulation” preventing speedy construction. While Trump and congressional Republicans are aiming to roll back some of the elements of the IRA, it remains to be seen how that will happen given the tiny Republican majority in the House.

Freeing up Freddie Mac and Fannie Mae

Another potential element that could impact the market is Fannie Mae and Freddie Mac, which together support more than 70% of U.S. mortgages. It’s possible the two government-sponsored enterprises could become privatized during the next Trump administration, a lobbyist for the Mortgage Bankers Association told Axios recently.

Speculation that Fannie Mae and Freddie Mac are on the hook ramped up recently after the Treasury Department released a roadmap for how removing the two entities from conservatorship would work. Trump never addressed GSEs during the campaign, but many of his biggest Wall Street backers are on board.

Nobody should consider such a move a done deal until the president-elect says he’s on board, Karoline Leavitt, spokeswoman for the transition, told Axios. Taking the two companies private would likely be an enormous boon to the stock market, with supporters like investor Bill Ackman telling his followers on X of a $31 value share for both companies.

Fannie Mae and Freddie Mac lost more than $200 billion after the financial crisis in 2008, much more than the companies had at the time. As a result, the federal government took ownership of about 80% of the companies and had full rights to their profits.

They are very valuable more than 15 years after the financial meltdown, but Fannie Mae alone still owes the Treasury Department $212 billion after earnings were retained to beef up capital. Moving them out of government hands would also create more risk as they would no longer have full taxpayer backing, meaning mortgage rates would likely increase.

One big reason Trump won in 2024 was because mortgage rates skyrocketed after he left office.

What about deportations?

Much of the price increase is a result of unfiltered, mass immigration, according to Vice President-elect J.D. Vance. He mirrored the transition team’s position on the subject during his vice-presidential debate in October.

“In communities all across this country, you’ve got schools that are overwhelmed, you’ve got hospitals that are overwhelmed, you have got housing that is totally unaffordable because we brought in millions of illegal immigrants to compete with Americans for scarce homes,” Vance said.

During his campaign, Trump promised to deport an estimated 11 million immigrants who lack permanent legal residence in the U.S. Incoming Trump officials are now wrestling with the logistics — to say nothing of the financial burden — of rounding up and removing that population size.

And while those who are deported might leave more housing for others, there would likely be a void left in the labor supply needed to build new homes.

Problems ease on their own

There’s always the possibility that housing pressures ease on their own.

That’s the view of National Association of Realtors Chief Economist Lawrence Yun, who points to homes sitting on the market longer as buyers wait for mortgage rates to drop. Many househunters are starting to accept rates around 6% as the norm.

Yu told CNN that pending home sales rose for the fourth consecutive month in December, meaning steeper price cuts are coming. “I think the low point in home sales was pretty much done in 2024,” he said. “I think there will be more movement in the housing market this year.”

At the same time, mortgage rates are often pegged to the Federal Reserve’s terminal interest rate, which is itself a reflection of where inflation stands at any given moment. When prices across the board are high, then the central bank steps in and increases rates.

So far, Fed policymakers are planning to stay in a holding pattern and keep interest rates roughly where they are right now. Fed Chairman Jerome Powell cites economic uncertainty in the incoming Trump administration, which many economists fear will aggravate through high tariffs on imported goods.

Much of what happens ultimately depends on whether Trump recognizes his economic agenda coming into his administration is wading against the current trends, Parrott, the Urban Institute fellow, said.

“A lot of what Trump has said points in the wrong directions, as far as home prices go,” he said.

Have a news tip? Contact Christopher White at cdwhite@sbgtv.com.