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Daily Dose of Real Estate: Trump’s Executive Orders – Facts, Figures, and Context

Key Takeaways

As the Trump administration takes office, the real estate market is poised for significant changes. Here are the key data points and their implications:

• Housing affordability index dropped to 91.7 in November 2024, down from 98.5 in November 2023, indicating worsening affordability¹. This decline suggests that despite Trump’s focus on affordability, challenges persist.
• Median existing-home price for all housing types in December 2024 was $402,000, up 68% from November 2019². This significant increase underscores the need for Trump’s policies to address rising home prices.
• 30-year fixed mortgage rate stood at 6.91% as of January 2025, up from 2.8% in January 2021³. The sharp rise in rates over the past four years presents a challenge for the new administration’s housing affordability goals.
• Commercial real estate values declined 5.9% year-over-year according to the Trepp Property Price Index⁴. This decline highlights the potential impact of Trump’s policies on the commercial sector.
• CMBS issuance in 2024 surpassed $100 billion, nearly triple the 2023 figures⁵. This surge suggests growing confidence in the commercial real estate market, which could be further bolstered by Trump’s pro-business policies.

Residential Real Estate Markets: Data-Driven Insights

Market Conditions and Trends

The residential real estate market faces both challenges and opportunities as the Trump administration takes office:

• Existing-home sales totaled 4.09 million in 2024, down 6.2% from 2023 and 18.7% from 2022⁶. This decline indicates a cooling market, which Trump’s policies aim to reinvigorate.
• Housing inventory at the end of December 2024 stood at 970,000 units, a 5.3% increase from December 2023⁶. While inventory has improved, it remains low by historical standards, supporting Trump’s focus on increasing supply.
• Months’ supply of inventory was 2.9 months at the current sales pace, up from 2.7 months in December 2023⁶. This slight increase suggests a marginal improvement in supply-demand balance.

Impact of Trump’s Policies

President Trump’s executive orders aim to address housing supply and affordability:

• The administration plans to open up 20% of federal lands for residential development⁷. This could significantly increase land availability for new housing construction.
• A targeted 15% reduction in housing regulations is expected to stimulate construction⁷. This deregulation could potentially lower construction costs and increase housing supply.

Demographic Shifts and Buyer Behavior

Changing demographics continue to shape the housing market:

• First-time buyers accounted for 29% of sales in December 2024, down from 31% in December 2023⁶. This decline highlights the ongoing challenges for younger buyers entering the market.
• The median age of first-time homebuyers increased to 36 years in 2024, up from 33 years in 2021⁸. This trend underscores the need for policies that support younger buyers.

Mortgage Markets: Rates and Projections

Current Mortgage Rates

Mortgage rates have risen significantly, impacting affordability:

• CURRENT 30-year fixed-rate mortgage on January 21 is 7.08%
• 30-year fixed-rate mortgage averaged 6.91% as of January 2025³
• 15-year fixed-rate mortgage averaged 6.23% as of January 2025³
• 5/1-year adjustable-rate mortgage (ARM) averaged 5.89% as of January 2025³

These higher rates present a challenge for the Trump administration’s housing affordability goals.

Federal Reserve Policies

The Federal Reserve’s actions continue to influence the mortgage market:

• The federal funds rate was maintained at 5.25%-5.50% in the January 2025 meeting⁹. This decision reflects the Fed’s cautious approach to inflation control.
• The inflation rate stood at 3.4% in December 2024, above the Fed’s 2% target¹⁰. This elevated inflation rate may influence future Fed decisions and mortgage rates.

Trump’s Proposed Changes to GSEs

The administration’s plans for Fannie Mae and Freddie Mac could reshape the mortgage market:

• Ending the conservatorship of these entities could affect $7 trillion in mortgage-backed securities¹¹. This move could potentially increase private sector involvement in the mortgage market.
• The proposed changes could impact the $11 trillion U.S. residential mortgage market¹². The full implications of these changes remain to be seen.

Commercial Real Estate Markets: Sector-Specific Data

Office Sector

The office sector faces significant challenges:

• Office vacancy rate reached 18.6% in Q4 2024, the highest since 1991¹³. This high vacancy rate reflects ongoing shifts in work patterns and presents a challenge for the sector.
• Net absorption was negative 5.1 million sq. ft. in Q4 2024¹³. This negative absorption indicates continued weakness in office demand.
• Average asking rent decreased by 1.2% year-over-year to $35.10 per sq. ft.¹³ The decline in rents reflects the challenging market conditions.

Retail Sector

The retail sector shows signs of recovery:

• Retail vacancy rate stood at 4.9% in Q4 2024, down from 5.1% in Q4 2023¹⁴. This improvement suggests increasing stability in the retail market.
• Net absorption was positive 8.2 million sq. ft. in Q4 2024¹⁴. The positive absorption indicates growing demand for retail space.
• Average asking rent increased by 2.5% year-over-year to $22.90 per sq. ft.¹⁴ This rent growth reflects improving market conditions in the retail sector.

Multifamily Sector

The multifamily sector faces some headwinds:

• Multifamily vacancy rate increased to 5.5% in Q4 2024, up from 4.8% in Q4 2023¹⁵. This rise in vacancy rates suggests some softening in the multifamily market.
• Net absorption was negative 15,000 units in Q4 2024¹⁵. The negative absorption indicates a temporary oversupply in some markets.
• Average asking rent decreased by 0.8% year-over-year to $1,850 per month¹⁵. This slight decline in rents reflects the competitive nature of the current market.

Impact of Trump’s Policies

The Trump administration’s policies could significantly impact the commercial real estate sector:

• The creation of the Department on Government Efficiency (DOGE) aims to reduce the federal real estate footprint by 15% over four years⁷. This could potentially increase available office space in certain markets.
• A proposed 20% tariff on imported construction materials could increase commercial development costs¹⁶. This policy could impact new construction and renovation projects across all commercial real estate sectors.

CMBS/REIT Markets: Performance Metrics

CMBS Market

The CMBS market shows mixed signals:

• CMBS issuance in 2024 reached $102.5 billion, a 185% increase from 2023⁵. This surge in issuance indicates growing investor confidence in commercial real estate debt.
• CMBS delinquency rate climbed to 4.91% in December 2024, up 191 basis points from December 2023¹⁷. The rising delinquency rate suggests ongoing challenges in certain commercial real estate sectors.
• Office sector delinquency rate hit an all-time high of 11.01% in December 2024¹⁷. This high delinquency rate in the office sector reflects the ongoing struggles faced by office properties.

REIT Market

REITs show resilience despite market challenges:

• FTSE Nareit All Equity REITs Index total return was 8.9% in 2024¹⁸. This positive return indicates the overall strength of the REIT market.
• Dividend yield for all equity REITs averaged 4.2% in Q4 2024¹⁹. The attractive dividend yield continues to draw investor interest.
• Funds from operations (FFO) for all equity REITs increased by 3.5% in Q4 2024 compared to Q4 2023¹⁹. This growth in FFO suggests improving operational performance for REITs.

Regulatory Changes

Proposed regulatory changes could significantly impact the CMBS and REIT markets:

• Changes to Fannie Mae and Freddie Mac could affect $300 billion in multifamily CMBS¹². This highlights the potential far-reaching effects of GSE reform on the commercial real estate debt market.
• The Trump administration aims to reduce Dodd-Frank regulations by 40%, potentially impacting CMBS and REIT markets²⁰. This deregulation could lead to increased activity and potentially higher risks in these markets.

Navigating the Trump-Era Real Estate Landscape: Key Implications

As we analyze the data presented, several key implications emerge for the real estate market under the Trump administration:

1. Housing Affordability Challenges: With the housing affordability index at 91.7 and median home prices up 68% since 2019, addressing affordability remains a critical challenge. Trump’s policies aim to increase supply, but their effectiveness in improving affordability remains to be seen.
2. Mortgage Market Volatility: The significant increase in mortgage rates to 6.91% from 2.8% in 2021 presents a major hurdle for homebuyers. The administration’s policies and their impact on inflation will be crucial in shaping future mortgage rate trends.
3. Commercial Real Estate Sector Divergence: While the office sector struggles with high vacancy rates (18.6%) and delinquencies (11.01%), retail and multifamily sectors show more resilience. Trump’s policies, including federal real estate reduction and potential tariffs, could further reshape these markets.
4. CMBS and REIT Market Opportunities: Despite challenges, the CMBS market’s robust issuance ($102.5 billion in 2024) and REIT market’s positive returns (8.9% in 2024) indicate ongoing investor interest. Proposed regulatory changes could create new opportunities and risks in these markets.
5. Policy Impact on Construction and Development: The administration’s plans to open up federal lands and reduce regulations by 15% could stimulate new construction. However, potential tariffs on construction materials may offset some of these gains.

As the real estate industry adapts to the new administration’s policies, stakeholders must remain vigilant and data-driven in their decision-making processes. The interplay between policy changes, economic factors, and market performance will continue to shape opportunities and challenges across all real estate sectors.

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