Is a December rate hike still on the table?
Tuesday night, now President-elect Donald Trump shocked the world as he took the victory over Democratic presidential nominee Hillary Clinton.
Now, Twitter is trending with hashtags such as #NotMyPresident, #MourningInAmerica and #ImStillWithHer.
But what do housing experts say about this shocking Trump victory? As it turns out, they’re very divided in their opinions of what this will mean for the housing market, and the economy overall.
“We can make sense of this surprising outcome if we recognize that every voter is a housing voter,” Redfin Chief Economist Nela Richardson said. “Though America’s growing housing affordability crisis was largely absent from the election campaign, it is a singular issue that cuts across all segments of voters, affected in one way or the other by home and rental prices.”
“Where people live affects their job opportunities, the quality of the schools their kids attend, and in turn, the economic mobility and productivity of our country and its citizens,” Richardson said. “As a country we need to enter a new chapter in housing policy, one that disrupts old ways of thinking and embraces a path of inclusionary growth and shared prosperity. America’s electorate requires nothing less.”
Richardson is certainly right about one thing – housing was a topic that was definitely absent from the campaigns. But perhaps that is what is dividing this market even more: no one really knows what a Trump presidency means, or what he will do when it comes to the housing industry.
“This is very much a step into the unknown because we simply can’t know what type of President Trump will be,” Capital Economics Chief Economist Paul Ashworth said. “Will he be the demagogue from the campaign trail, who threatened to lock up his political opponents, punish the media, build border walls and start a global trade war? Or is he capable of becoming a statesmanlike figure who leads in a more measured manner?”
“Given the adverse market reaction we have already seen, the Fed’s planned December rate hike is now off the table,” Ashworth said. “There is a possibility that Fed Chair Janet Yellen and even some other Fed Governors (Lael Brainard??) will resign immediately.”
Other experts agree that his lack of focus creates a whirlwind of uncertainty as markets try to guess what the new president-elect’s decisions will be.
“Perhaps most uncertain about a Trump presidency is what will happen to housing markets because of policy change,” Trulia Chief Economist Ralph McLaughlin said. “Trump hasn’t much discussed housing policy during his campaign, but he has hinted to ‘Make America Great Again’ by boosting the homeownership rate through demand-side policies, such as financial deregulation, rather than through supply-side policies such as reducing local impediments to new supply.”
“Like other markets, prices are likely to rise further if policies lopsidedly target demand without also addressing supply,” McLaughlin said. “In few other industries than housing is addressing supply equally as important as demand for mitigating affordability pressures, and we advise President-elect Trump to take a more balanced approach to the housing market as President Obama.”
But others disagree. As it turns out, not every thinks a Trump presidency will hurt the economy. After all, he did win the election.
“We expect a rate increase in December to be put firmly back on the agenda in coming weeks,” Edison Investment Research analyst Alastair George said. “The sharp decline in market-implied odds for a December rate increase is anomalous in our view.”
“There will be very limited changes in the employment and inflation data by December and we believe a rate increase has been clearly telegraphed in recent FOMC statements,” George said.
In fact, one expert explains that the drop in the stock markets as Trump was declared victorious is actually perfectly normal.
“Global markets were shaken earlier in the day after Trump swept to victory ahead of Hillary Clinton,” said Nigel Green, deVere Group founder and CEO. “This was expected as Trump was the outsider who represents uncertainty, which always creates volatility in the markets.”
“However, financial markets have recovered somewhat after Trump’s acceptance speech due to its notably conciliatory tone and content,” Green said. “It offered reassurance and the markets have responded accordingly.”
Other experts, such as the Mortgage Bankers Association, congratulated Trump on his victory, but also outlined what the industry needs to see going forward.
“It is critical that President Trump focus on three main areas – ensuring an adequate supply of affordable housing, bringing first time homebuyers back into the housing market and ensuring certainty in regulations,” MBA President and CEO David Stevens said.
The industry remains divided, and perhaps will stay that way until more is known about what kinds of decisions Trump will make once he reaches the White House.
As for a December rate hike? What seemed like a sure-thing before is now the topic of much uncertainty.