President Trump’s day-one executive order on housing signals that tackling the housing affordability crisis in the U.S. will be a priority. His remarks on tariffs should bring mortgage rates down a bit.
President Trump issued an executive order on housing on the first day of his second term, signaling that he is serious about addressing the national housing shortage and affordability crisis.
Takeaway: For housing, the most tangible immediate consequence of Trump taking office is that mortgage rates will come down slightly. That’s because action on tariff policy has been more benign than expected so far. Trump’s other actions around immigration and lowering the cost of housing are vague at this point, and are unlikely to have immediate consequences. We’ll keep an eye out for more detailed plans.
Mortgage rates will see some relief as near term action on broad-based tariffs seem less likely. Trump’s remarks on China were significantly less hawkish than his recent commentary and the trade policy memo that was uncovered. While additional tariffs on China seem probable, they now appear to be a lower priority. 25% tariffs on goods from Canada and Mexico are still a distant possibility, despite remarks suggesting a February 1 timeline. He made similar remarks about Mexico in 2019 that never materialized. And his recent pledge was to implement these tariffs on Inauguration Day, but he is now kicking the can down the road.
A universal tariff seems unlikely given Trump’s remark that “[he] may, but we’re not ready for that yet.” His trade policy memo instructs administration officials to report back on progress by April 1, suggesting that any changes would come in Q2 at the earliest, and that there is no agreement within the administration on their approach.
President Trump issued a directive to reduce the cost of housing. He plans to do that by reducing the regulatory burden of construction, but there are no specifics on how the federal government would achieve that goal. Much of the regulatory red tape hampering housing construction is controlled by local governments. Past presidents have incentivized local governments to build more housing. It’s possible Trump could take unprecedented measures, like withholding state funding or asserting the federal government has the legal authority to override local zoning laws in certain circumstances. Trump has expressed interest in building on federal lands, but that alone is unlikely to provide enough new housing to move the needle. The federal government has a more direct impact in mortgage financing. Here, the administration may explore privatizing the GSE’s, lowering fees associated with taking out a mortgage, or making it easier to get a mortgage.
Immigration is seemingly a higher priority for the administration. Trump took multiple actions to slow the flow of migration across the border on the first day of his second term, but he has not taken any steps toward the more extreme scenario of deporting people who are already in the U.S. Fewer immigrants means higher construction costs, but it’s much too early to estimate the impact.
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