Epic Real Estate Investing - How the 2024 Presidential Election Could Impact the Housing Market (Data-Backed Predictions) | 1355

Episode Date: September 19, 2024

In this episode, we take an in-depth look at the housing market policies proposed by Donald Trump and Kamala Harris as we approach the critical 2024 election. With the housing market currently facing a crisis characterized by a severe shortage of homes and skyrocketing prices, understanding each candidate’s proposals is more crucial than ever. We break down Harris's ambitious plans, which include offering $25,000 in down payment assistance to first-time homebuyers and committing to the construction of 3 million new homes aimed at alleviating the housing shortage. In contrast, we explore Trump’s approach, which focuses on reducing regulations and making federal land available for new development, potentially fostering a more market-driven environment. Throughout the episode, we delve into historical data to uncover how previous presidential elections have influenced real estate prices and market dynamics. We examine key factors that play a pivotal role in the housing sector, such as interest rates, rental trends, and inflation, and how these elements could shift depending on the election outcome. Moreover, we assess the potential impacts of each candidate’s strategy on home affordability and investment opportunities for buyers and investors alike. Finally, we emphasize the importance of making informed, strategic real estate decisions based on current market fundamentals and the anticipated policy changes stemming from the election. Join us for a comprehensive discussion that equips you with the insights needed to navigate the evolving housing landscape in these uncertain times. Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terio Media. Hey, strap in. It's time for the epic real estate investing show. We'll be your guides as we navigate the housing market, the landscape of creative financing strategies, and everything you need to swap that office chair for a beach chair. If you're looking for some one-on-one help, meet us at rei-aise.com. Let's go, let's go, let's go, let's go, let's go, let's go.

Let's go. Who's going to win the housing market war? or Kamala Harris. I'm going to lay out their plans, and by the end of this, you'll know without a doubt how each candidate will impact the housing market. And it's going to surprise you. Here's what's at stake. The housing market, it's in crisis mode as prices are running away from Americans, and with the housing affordability already out of reach for so many. And just barely within reach for so many more, one wrong move by the next president could crush the American dream for most of the population. Here's the reality. We're short four and a half million homes, which has led to skyrocketing prices due to the basic principle of supply and demand. It's common sense that everyone seems to understand when referring to the latest exclusive sneaker release by Nike or Super Bowl tickets. But when it comes to real estate, people forget it's going to crash any minute, they say. The prices, they can't go up forever, they say.

No, prices can go up forever if the supply problem isn't fixed. In order for the market to crash, you need a bunch of houses for sale. That's how a crash happens. no houses, no crash. And the market doesn't care if you disagree or not. When supply can't keep up with demand, buyers, they bid against each other, and that drives prices higher. It's this shortage, more than anything else, that's contributing to the high cost of home ownership.

The key issue is whether the candidates in the upcoming election have viable plans to address this shortage and bring more homes into the market. Now, before looking at each candidate's plan, because we'll do so in detail, because they're very different, let's first look at how historically presidential elections have impacted the housing market in the past. What happens when a Republican wins? And what happens when a Democrat wins? Historical data shows a consistent rise in home prices

during election years over the past 28 years, with 2008 being the only exception. Even in years with political uncertainty, such as 2004, 2012, and 2020, home prices increased by double digits, ranging from 10 to 20%. The reasoning behind this trend includes macroeconomic factors

like lower interest rates during election years and temporary boosts in consumer confidence. However, whether you should jump into the market depends on other factors like local conditions, interest rates, and your financial readiness. If you're considering a move soon, it's best to act before prices surge even further, which often happens after election years

as uncertainty dissipates and consumer confidence increases. If history is to repeat itself, prices are going up in 2020. Now, if you're considering an investment, we want to look at three things. First, interest rates. Historically, interest rates tend to decrease during election years, but they typically rise in the following year. If you believe in the patterns, investors might want to lock in deals now before rates go up, giving them a better chance to secure favorable financing.

Two, rents. Even during challenging times, like 2008, rents increased every year during the last eight elections, driven by consistent rental demand. As an investor, this is what you want for your cash flow stability and your rental returns. Shameless plug for cashflow savvy.com here. And three, inflation and affordability. COVID stimulus and ongoing inflation have pushed costs higher. But the often overlooked rebounding population growth is expected to further increase housing

demand and sales volume in 2025, creating a favorable environment for real estate investors, particularly if you already own some and if you're in the fix and flip biz. Now, as favorable as it may look, you still want to focus on the fundamentals and avoid over-leveraging. So consider investing before the election to benefit from lower interest rates, and remember that rent growth, it remains strong even in turbulent times. Keep an eye on inflation and affordability challenges, but also recognize that population growth may render them less consequential as it further boosts

demand. So that's the pattern of the housing market during election years over the last 28 years, and whether a Democrat or Republican won the election, it didn't make a bit of difference. But things seem different this time. So now let's take a look at the candidates for this election and their plans. Kamala Harris says she'll build 3 million new homes. That sounds amazing, right? But is it that simple?

I mean, you've got bureaucracy, labor, and land to consider. Plus, her $25,000 down payment assistance plan, it's likely to actually push prices even higher by increasing demand before first fixing the supply. But would Trump's plan be better? He's promising to cut regulations and open federal land for construction, which addresses the supply issue. But will his crap down on immigration cause a labor shortage, driving costs up for builders, and ultimately neutralizing his housing plan before it ever gets off the ground? Lots of questions. So let's address them one by one.

Kamala Harris is bringing some pretty bold ideas to the table when it comes to housing. Here's what she's promising. First, she's talking about giving $25,000 to first-time homebuyers to help cover their down. down payment. This would be for people who've been paying their rent on time for two years or more. And if you're a first generation homeowner, you could get even more than $25,000. Sounds great, right? Especially when saving up for that first down payment is one of the biggest hurdles people face when trying to buy a home. This is sure to be popular for people who fall into that category. But then there's this. While the assistance might help more people afford homes, it could actually make

things worse if we don't fix the supply issue first. If there aren't enough homes to go around, what happens when everyone suddenly has more money to buy? Prices go up. It's very much like throwing gasoline on a fire. We need more homes first before making it easier for people to buy them. Further, the real beneficiary of this $25,000 assistance would be the developers more than the individual households. A plan similar to this was attempted in Utah just last year, 2003, as part of Senate Bill 240, and it failed miserably, immediately, due to a lack of qualifying supply. It sounds great on paper, but the execution is where things fall apart. Now, Harris also has the ambitious goal to build 3 million new homes over four years.

This part of the plan is definitely aimed at tackling the housing shortage, so this is good. I like this. The idea is to boost the supply of both single family and rental homes, and to target the barriers that are making it hard to build at the state. and local levels. This is where the plan sounds promising, but there are some concerns. The first is the Democrat Party is the party of the barriers that have made it hard to build in the first place. For example, during this current Biden-Harris administration, Biden signed executive orders, such as Executive Order 13990 that revoked Trump's deregulations designed to streamline housing development and cut costs. Biden and Harris could rescind this executive order as easily as they

issued it right now if they wanted to. So why wait? There's been plenty of opportunity to do it before now even. It's not like we just woke up this morning with a housing crisis. Currently, we're building approximately 1.1 million houses a year instead of the 1.6 million we actually need. If we're to believe she'll build an extra 3 million homes by the end of her first term like she's promised, she better get started right now if she's to keep that campaign promised. And there are other questions. Where are these homes going to be built? You can't just build houses any. You need buildable land. And then there's the issue of labor.

Who's going to build these homes? Plus, with all these builders competing for limited supplies, will that drive up their costs? Yes, it will. Especially if a lot of builders are working in the same area. So while adding more houses could help, it's not as simple as just deciding to build them. Now here's another big part of Harris's plan. She wants to remove key tax benefits for investors who own 50 or more single-family properties. The idea here is to discourage investors from grabbing up affordable

starter homes and driving up prices. But not all investors are out to take advantage. Removing tax benefits for investors could actually hurt affordability too. Some investors, especially those who build rental homes, actually increase the supply of family-sized housing. And like it or not, we need investors to keep putting money into single-family rentals because the more capital they invest, the lower rents are for families. So by removing these tax benefits, fewer rental homes will be built. And therefore, we will end up with higher rents, which is the opposite. of what we want. Even more simply put, if a part of her $3 million extra home plan includes building rentals, who is going to own them if investors are disincentivized to own less than 50? I don't think

this was thought through. These two parts of her plan, they can't really coexist. And Harris's plan also includes tax incentives for builders to create more starter homes and rental properties. But here's where it gets wonky. Builders get tax incentives to build the properties, not to own them. So who's supposed to buy these rental properties and then rent them out. Plus, tax incentives alone won't be enough to get builders excited. They still have to put in all the work. They still have to take all the risk before they even see any of that incentive. What builders really need is less red tape, less bureaucracy, and access to affordable land. Those are the things that would actually motivate them to build more homes. And then I can't get past this irony. While Harris talks about cutting through

barriers, the current administration of which she's apart, has been putting more barriers in place. Why promise to do later that can be done now? It's hard not to be skeptical about whether there's any real intent behind her plan other than to get elected. Lastly, who wants to own rentals under her administration, considering her support for unrealized capital gains tax and national rent control? Her plan, it's not going to work if she incentivizes a behavior on the one hand and disincentivizes it on the other. Her entire, her entire. Her entire, it's not going to work. It's not higher position on housing and investing, it's filled with contradiction. Nonetheless, Harris has some ideas that could really shake up the housing market, but it all depends on how well they're implemented

and if they're implemented at all. Either way, though, the supply problem needs to be solved first, or we're assuredly looking at even higher prices and rents, which would hurt both buyers and renters alike, the opposite of her proposal's intentions. All right, let's dive into Trump's housing policies and what they might mean for real estate. So Trump's plan has a few big elements. First off, he wants to reduce illegal immigration and even ban mortgages for immigrants without legal status. It's not an idea that's based in racism or xenophobia in case that's what you're thinking. No. The idea here is that fewer people competing for homes would bring prices down. That part, it's very logical and very true. However, the harsh reality is the U.S. construction

labor shortage is a major contributor to rising home prices. A dwindling construction labor force has been an ongoing issue for a while, partly due to an aging workforce and the difficulty of attracting younger workers into the industry. Why be a plumber when you can be a social media influencer? And I'm not being facetious. A recent study conducted by morning consult revealed that a whopping 86% of young Americans aged 13 all the way to 38 aspire to become social media influencers. There's been a massive shift in career ambitions in this country, with many turning away from more traditional jobs in favor of the allure and perceived freedom of the influencer lifestyle. Fewer plumbers, fewer plumbers, fewer electricians, carpenters, masons, roofers means fewer homes built.

And if we stay on that path, construction costs can only go up and home prices will follow. So depending on the magnitude of Trump's crackdown on illegal immigration, it could actually make things worse by reducing the construction labor force, worsening affordability. Whether you agree or not, it is a rational argument that's out there. Another part of Trump's proposal includes opening federal land for home construction, based on the idea that housing costs are high because land is scarce. More logic at play here, but where this land is located, it matters a lot. Most federal land, it's out west, much of it in areas prone to wildfires or with limited water supply. Plus, most of the government's land isn't exactly in high demand for

housing, so it may not solve the affordability problem the way it's intended to, meaning what good are more houses if nobody wants to live there. Trump also wants to eliminate costly regulations to make homes cheaper and faster to build, as he once did, because there are definitely regulations that create unnecessary costs, especially those tied to building design and construction. But some of these regulations are there for a reason, like making sure houses don't fall apart. So while deregulation might help cut costs, you don't want to overdo it and risk quality or safety. And lastly, Trump plans to encourage construction on the periphery of cities and suburban air. areas where land is cheaper. The idea here is simple. Build on cheaper land and the homes can be

sold at more affordable prices. This is workable. But in places like California, those peripheral areas are often far from jobs and schools, which could limit the appeal of homes in those areas. Plus, you've got to think about commuting distance. It's not always practical for people to live that far outside the city. I lived inside the city when I was in California and the traffic was too much. But here's what's for sure. If the supply of available homes doesn't increase, home prices will continue to rise. So I don't know, will either Canada actually make homes affordable, or are they just trying to win an election? What do you think? With 18% of voters still undecided, this election could be the tipping point for housing in America. Now, from a real estate investor's

perspective, Trump's policies benefit the real estate investor much more by way of deregulation and tax savings, like bonus depreciation and the 1031 exchange, no taxation on unrealized gains, support for free market rent control, and favorable leverage terms. In other words, refinancing without it being taxed as income. But what does this all mean for you personally? Whether you're an investor or a first-time homebuyer, the key is to stay strategic. It's not about timing the market perfectly, but about making decisions based on solid fundamentals. And the fundamentals are pointing to an appreciating housing market for the foreseeable future. Now, I know you might be skeptical, and you're right to be cautious.

I hear the concerns about high interest rates, but they're coming down now and whether the market can continue to grow after such a big boom during the pandemic. The fundamentals now are very different than in 2008, especially when it comes to housing supply and demand, which is what will ultimately govern housing's direction. But also, just because the data points to growth, it doesn't guarantee it. Local conditions matter, too. You should always consider what's happening in your area, from job markets to population trends. Don't rely solely on national predictions.

I'll see you next time. Take care. And that wraps up the epic show. If you found this episode valuable, who else do you know that might too? There's a really good chance you know someone else who would. And when their name comes to mind, please share it with them and ask them to click the subscribe button when they get here and I'll take great care of them. God loves you and so do I.

Health, peace, blessings, and success to you. I'm Matt Terrio. Living the dream. Yeah, yeah, we got the cash flow You didn't know home for us, we got the cash flow This podcast is a part of the C-suite Radio Network For more top business podcasts, visit c-sweetradio.com