The recent election results are already influencing expectations about the residential real estate market. With potential policy changes on the horizon, from corporate tax cuts to interest rate adjustments, buyers, sellers, and investors should be prepared to adapt to a shifting landscape. Here’s what to watch and how these factors might play out.

1. Corporate Tax Cuts and Lower Unemployment

Projected corporate tax reductions could boost business profitability, which may lead to lower unemployment rates. As people gain financial stability and disposable income, demand for housing could increase, especially in regions with strong job markets. This may favor sellers in certain areas, but broader market trends could temper these gains.

2. Reduced Immigration and Slower Population Growth

A decrease in immigration and slower population growth could reduce the demand for housing. Immigration has historically driven growth in urban and suburban housing markets, so any slowdown might lead to fewer new developments and a cooling in regions that rely heavily on population inflows.

3. Federal Funds Rate Expected to Decline

The Federal Reserve is projecting a gradual decrease in the federal funds rate, potentially reaching 3.5% or 3.25% by the end of 2025. While higher interest rates are currently affecting borrowing costs, this projected decline could lead to more favorable conditions for buyers and refinancing opportunities for homeowners. However, any immediate upward pressure on mortgage rates could continue to impact affordability in the near term.

4. Rising Interest Rates and Immediate Market Impacts

In the short term, interest rates are expected to rise, which will increase borrowing costs for buyers and could dampen purchasing power. Sellers may need to adjust expectations, offering competitive pricing or incentives to attract buyers navigating higher monthly payments.

5. Tariffs and Higher Construction Costs

Tariffs on imported materials like lumber and steel may increase the costs of home construction. Builders facing rising expenses might pass these costs to buyers, further exacerbating affordability issues. This could create an even tighter inventory of affordable housing in already competitive markets.

Navigating a Complex Market

For homeowners, buyers, and investors, these dynamics highlight the importance of long-term planning and strategic decision-making. Here’s how each group can adapt:

Buyers: Look for opportunities to lock in favorable interest rates and consider homes in markets with potential for future growth.
Sellers: Be prepared to price competitively and consider offering incentives like interest rate buy-downs to attract hesitant buyers.
Investors: Watch for undervalued properties or areas with steady demand, particularly those tied to job growth and infrastructure investments.

Looking Ahead

While short-term volatility is expected, the projected decline in the federal funds rate by 2025 may create a more favorable lending environment. At the same time, reduced immigration and rising construction costs could shape supply and demand in different ways. For now, adaptability is key.

At Adam Timothy Group, we help clients navigate these market changes with confidence. Whether you’re planning to buy, sell, or invest, our team is here to provide expert guidance tailored to your unique goals.