Donald J. Trump was inaugurated as the 45th President of the United States on Friday afternoon, and those in the housing industry are expecting that the changes promised by the new administration will be beneficial to the housing industry.
An estimated 800,000 people gathered at the nation’s Capitol to witness the swearing in of Trump and his Vice President, Mike Pence. Trump’s inauguration speech was heavily focused on returning the country back to the American people and putting American people first.
“This moment is your moment. It belongs to you. It belongs to everyone gathered here today and everyone watching all across America,” Trump told the crowd gathered for the inauguration. “This your day, this is your celebration, and this, the United States of America, is your country. What truly matters is not which party controls our government, but whether our government is controlled by the people. January 20, 2017, will be remembered as the day the people became the rulers of this nation again.”
Among the changes that Trump or his cabinet appointees have promised to make are rolling back regulations for housing, which greatly increased in response to the crisis of 2008; and ending the government’s conservatorship of Fannie Mae and Freddie Mac, which was intended to be temporary when it started in September 2008.
“I welcome the inauguration of Donald J. Trump as President of the United States and the change a new administration will bring to the nation,” said Ed Delgado, President and CEO of the Five Star Institute and a former executive with Wells Fargo and Freddie Mac. “As a successful and prominent real estate developer, I believe President Trump is uniquely qualified to address the concerns and challenges facing the housing and mortgage markets with sound policies and strong cabinet appointments.”
Trump has also promised reform to the Consumer Financial Protection Bureau, which Republicans have long criticized as unaccountable and overreaching. In particular, Republicans have been critical of the CFPB’s handling of enforcement activities within the mortgage industry, which they believe have made mortgage loans more expensive and more difficult to obtain.
“I hope both the Trump Administration and Congress include on their ‘priority list’ how to bring some stability and certainty to our nation’s housing finance system,” said Brian Montgomery, Vice Chairman and Co-Founder of the Collingwood Group and a former FHA Commissioner in the Bush and Obama Administrations. “Excessive enforcement actions, coupled with state and federal regulatory reforms, have discouraged mortgage lenders from making any loans that fall outside of the strict boundaries set by CFPB regulations. In the end, prospective homebuyers, including many who are first-time buyers with perhaps a blemish or two on their credit score, are largely shut out of the mortgage market from this stifling of housing credit.”
The homeownership rate in the U.S. sank to a 51-year low in the second quarter of 2016, down to 62.9. It rose by 60 basis points in the third quarter but is still hovering above a record low.
“There is tremendous opportunity,” said Meg Burns, Managing Director of the Collingwood Group. “The Trump leadership team has publicly acknowledged a concern with the regulators' heavy-handed approach over the course of the crisis. There is a good chance that they will halt the very aggressive enforcement activity. It would be best to return to a monitoring regime that identifies problems and issues, so that they can be addressed and resolved, as opposed to stringent enforcement for the sole purpose of imposing financial penalties. The latter approach has clearly resulted in less lending activity and stifled access to credit.”
For the last several months, the housing industry has been experiencing a shortage of available inventory for sale as demand has outpaced supply, and new construction has not been keeping up with the demand.
“[T]he administration of Donald Trump could take a fresh look at existing regulations across the board, and that could result in new rulemaking to change provisions that are hurting real estate, including provisions in the Dodd-Frank financial services reform law enacted in 2010 in response to the financial crisis,” the National Association of Realtors (NAR) wrote. “NAR analysts say the association might favor easing some Dodd-Frank requirements on community banks, which traditionally provide the bulk of financing for housing construction. Housing starts have been far below what’s needed to meet rising demand, and easing some requirements on community banks could lead to more robust construction lending.”
The inability of Congress until now to address the longstanding issues in the housing industry has had seriously adverse effects for the U.S. economy as a whole, according to Collingwood Group President Brian O’Reilly.
“It's amazing that something so vital as housing to the overall health of the American economy and the average—is something Congress still can’t rally in support of resolving—especially when the risks associated with continued failure to do so are potentially so serious,” O’Reilly said. “The facts are that housing is a critical component of overall economic health in the U.S. Thus, continued failure by Congress to address housing reform is reckless and irresponsible.”