The Marketwise Blog, Nov 14th
Hot on the heels of one of the most interesting (or second most?) elections in modern history, 2025 is approaching quickly with a new world in American geopolitics and economics. Donald Trump is poised to retake the White House as the 27th president, marking a stunning political comeback. With the new Trump presidency, many questions surrounding economics are now at the forefront.
In the meantime, markets are responding to a second Fed rate cut in ways many didn’t expect. This past week, following the election, Fed Chair Powell announced a 25bps rate cut. Industry peers had hoped it would provide long-awaited relief to mortgage interest rates, but that relief didn’t materialize—not even close. Instead, the 10-year bond yield shot back up, driving rates into the high 6% and low 7% range. Hopefully, this is a post-election shock that will prove to be elastic, eventually bringing rates down to the 5% range.
Seasonal Decline and Market Resilience: A November Snapshot
The housing market experienced its typical seasonal slowdown during the first week of November, compounded by election week distractions and spiking mortgage rates. Inventory levels dipped nearly 2%, with 722,000 single-family homes available nationwide, but a rebound to 728,000 is anticipated in the coming week as delayed listings re-enter the market. While inventory remains 28% higher than last year, it’s notably down from the 40% increase seen in 2024. New listings also dropped sharply to 49,000—a 20% weekly decline—but this dip appears temporary, with expectations of a return to 55,000 listings next week. Meanwhile, pending sales dropped to 51,000, breaking a 10-week streak of year-over-year growth, signaling potential buyer hesitancy due to rising mortgage rates.
Despite these challenges, the market continues to show signs of resilience. Home prices dipped slightly alongside declining activity but remained 4% higher than a year ago, with the median price at $380,000. Interestingly, price reductions have ticked down, suggesting sellers are holding firm on their pricing expectations. As the market heads into 2025, affordability remains a pressing concern, but price resiliency is expected to persist. HousingWire’s upcoming 2025 forecast will shed more light on what lies ahead for sales volume, inventory, and pricing in the face of these evolving market dynamics.
Markets Surge Amid Election and Policy Optimism
The Dow Jones Industrial Average surged past 44,000 for the first time, rising 300 points on Monday and continuing a streak of record highs following the presidential election outcome. Investors have embraced the prospect of a more business-friendly administration, driving gains across large banks and financial firms that stand to benefit from deregulation and increased merger activity. Smaller companies also rode the wave, with the Russell 2000 hitting its highest level since 2021, up 1.5%. Meanwhile, Tesla shares jumped 9%, with CEO Elon Musk poised to play an influential role in the new administration. Tesla’s stock has surged nearly 50% since the election, reflecting optimism about favorable regulatory shifts for clean energy and innovation-focused policies.
Cryptocurrencies also saw dramatic gains as investors anticipated a shift in the SEC’s stance and potential policy moves such as a U.S. bitcoin reserve. Bitcoin prices climbed alongside Coinbase and Robinhood shares, with Dogecoin soaring 160% in the past month. Analysts predict that inflationary pressures, fueled by proposed tax cuts, tariffs, and wage hikes, may further boost interest in crypto and commodities like gold. As the market celebrates these policy signals, the momentum showcases the deep connection between political shifts and investor confidence across traditional and emerging asset classes.
Tariffs and Housing: A Looming Cost Crisis
Donald Trump’s trade policies, including his praise of tariffs as “the greatest thing ever invented,” could significantly impact U.S. homebuilding costs if he returns to the White House. Proposed tariffs of 10% to 20% on all imports—and up to 100% on products from China—are expected to increase inflation by 0.8 percentage points, according to Pantheon Macroeconomics, further straining affordability for builders and buyers alike. Higher tariffs on essential construction materials like lumber, steel, and aluminum, as seen during Trump’s first term, added nearly $9,000 to the cost of a single-family home. With framing lumber prices already 17.2% higher than last year, and ongoing sawmill closures in Canada reducing supply, affordability challenges in housing are expected to worsen under broad-based tariff plans.
Construction professionals remain cautious yet hopeful amid the uncertainty. Builders like Ryan Tatro of RT Construction note that fluctuating material costs and supply shortages have already disrupted the industry, forcing tighter pricing windows for projects. While alternative sourcing could mitigate some tariff impacts, comprehensive tariffs leave fewer options and are likely to drive costs higher across the board. As housing affordability remains a central challenge, policymakers and builders will closely watch how these proposals unfold and what ripple effects they might have on an already constrained market.
Wrap Up
As we approach 2025, the housing market and broader economy are entering a period of significant transition shaped by political and policy shifts. From seasonal slowdowns and resilient home prices to record-setting stock market highs and the specter of rising tariffs, the dynamics of this moment highlight the interplay between economic forces and consumer behavior. While markets are responding to leadership changes and rate cuts with mixed results, affordability, and access remain at the forefront of industry challenges.
Looking ahead, housing professionals, investors, and policymakers alike will need to adapt to a landscape where resilience and strategic planning are key. Whether it’s navigating the impact of tariffs, harnessing opportunities from evolving regulatory environments, or finding balance amid fluctuating mortgage rates, success will depend on staying informed and proactive. As we enter the new year, all eyes are on how these factors will shape a market poised for change yet deeply rooted in resilience.
