Now that President-elect Donald Trump has secured four more years in the White House, there are questions about how the housing market could be impacted. Homebuyers have complained for years about rising prices and high interest rates, making it impossible for many everyday Americans to purchase their first home.
“Republicans not only won the presidency but will also have a majority in the Senate,” Realtor.com Chief Economist Danielle Hale said. Hale called the pending Administration’s impact on the housing market a “toss-up,” saying the chief problem is the lack of supply. There has been a shortage of between 2.5 and 7.2 million homes over the last decade, according to Realtor.com.
“The Republican Party platform and President-elect Trump on the campaign trail acknowledged these challenges, shining a light on problems many voters face daily,” Hale said. “The proposals to tackle these challenges, however, are likely to have a mix of good and unintended, but negative, consequences for the housing market.”
Hale said proposed supply-side policies will likely help the supply, but his demand-focused proposals could have unintended negative consequences. The president-elect’s previously said he wanted to combat “unnecessary” housing development regulations, which can add more than $90,000 to the price of a new home.
While president-elect Trump promised to curb inflation, Hale said his actual policies could worsen the situation. “Falling mortgage rates would unlock homeowners who currently find moving untenable because their existing mortgage rate is so much lower than the market rate and also improve prospects for buyers by amplifying the buying power of their existing budgets,” Hale said. “However, taken as a whole, the various Trump policies could have the impact of raising inflation, particularly impacts stemming from proposed tariffs and reductions in immigration.”
The impact of the new administration’s stance on tariffs as they relate to hardwood lumber and, specifically, Alder is only a guess. If the tariffs were wide-reaching against countries beyond China, they might slow down the imports of plywood, kitchen cabinets, and doors from Asia. The impact on Mexico remains unknown, as any push against illegal immigration will also require their commitment, which will likely limit tariffs and possibly help Mexican manufacturers feed hardwood products North, displacing some percentage of Asian imports. Ultimately, the hope is that any tariff policy enacted by the new administration would help domestic manufacturers use more domestically produced lumber and plywood. Still, this type of broad market impact is probably years away.
Hale said Trump’s plans to curb illegal immigration could also significantly affect the labor supply needed to build new homes. According to the Census Bureau, up to a third of residential construction employs foreign-born workers. As a result, any initiatives to broadly remove large numbers of illegal aliens would hurt an already tight labor market.
If the USA is going to move on illegal immigration on a large scale, the incoming administration should soon find that it has to be done in an innovative and measured way. With the time for rhetoric behind us, the business side of these decisions will have to be factored into the immigration plan. Workers employed in agriculture, food processing, construction, elder care, and other areas with an extreme shortage of willing labor will likely find a revamped guest worker program where they can legally work and pay taxes. Trump and the Republicans are not dumb, and they will not squander the win around deporting 15+ million illegals for show. They will earn points by deporting those committing crimes, those who are not working depending on public benefits, and stopping the inflow of illegal migrants. There is a balance here that all sides will need to arrive at, and if they can meld campaign promises with the need for labor in some industries, it will make the coming years much better for home construction and household formation. Here is where the National Association of Homebuilders, the food lobby, and others should promote sponsorship programs available to employers who can advocate for hard-working, trustworthy workers who are a key part of their success. Getting past the hard-line rhetoric of today to a sensible approach needs to happen, and likely will. This would greatly benefit Cascade’s distributors and the manufacturers of cabinets, store fixtures, furniture, and interior trim.
We are now putting together budgets for 2025. While there is very limited downside market risk, determining the degree of upside in 2025 is proving extremely challenging. Our best guess is that the first half of the year may show a slight improvement but that the third and fourth quarters may outpace the first part of the year. It will take some time for the building economy to gain some inertia, but when it does, we look for positive things in the Alder markets.
Rick Barrett
Cascade Sales Manager
