(Bloomberg) — Before Donald Trump’s election, Redfin Corp. projected mortgage rates would average 6.1% next year. But three days after the election, they revised their estimate upward to 6.8% – basically unchanged from today’s high levels.
Most Read from Bloomberg
“The difference is Trump,” said Daryl Fairweather, chief economist at Redfin. “The market seems to be pricing in that he’ll move forward with at least some of the tariffs, but it’s really hard to know what Trump is going to do.”
It’s another hit for the housing market that’s been dealing with a rise in borrowing costs that’s pushed at least one measure of mortgage rates above 7%. Economists expecting higher-for-longer borrowing costs shows just how tough the market is likely to be for homebuyers trying to find affordable options.
“There was a view that rates would gradually fall, but that no longer seems to be the case,” said Thomas Ryan, North America economist at Capital Economics. “As a result, the housing market is going to stay frozen — as it is — for longer than we and other economists had expected.”
While the stock market rallied the day after Trump’s victory, the bond market has reacted with more trepidation given how tariffs and other policies might impact inflation. After the election, Barclays Plc economists raised their inflation projections for the next two years and lowered their outlook for economic growth, due to tariffs and potential immigration restrictions.
Trump’s proposal for an up to 20% tariff on all imports, and an even higher 60% tariff on Chinese goods, is one of the major causes of uncertainty. Economists have said this could lead to inflation as companies would likely pass on those cost increases to consumers. If he also imposes tax cuts, that could lower fiscal revenue and drive up the US deficit, pushing long-term rates even higher.
Some economists have also warned that Trump’s plan to deport millions of undocumented immigrants could further exacerbate the nation’s housing shortage. If Trump’s policies lead to an even smaller labor force for the construction industry, it would make it difficult to build new homes and make costs even more expensive.
“We need labor,” said Nadia Evangelou, senior economist at the National Association of Realtors. “Sometimes homebuilders are not able to deliver affordable homes, or the price point that people can afford to buy. And the reason is because of the labor shortage.”
