My Thoughts On TRUMP and Mortgage Interest RATES

Are Trump's policies about to make your mortgage more expensive? Let's dive into how tariffs, taxes, and the Fed could impact your wallet. In this video, we're going to break down Trump's policy proposals, their impact on inflation and mortgage rates, and what it means for home buyers, homeowners, and the housing market. Fed Chair Powell recently said that the economy looks better now than when the central bank started reducing interest rates back in September, which means the Fed can now move more slowly when reducing borrowing costs. He goes on to say that we can afford to be a little bit more cautious as we try to find a rate setting that neither spurs nor slows growth. While at the same time, Donald Trump has actually promised lower rates. In fact, he's also promising to make prices plunge again. So at the moment, we have a president that wants lower rates and also wants lower prices just in the market overall. In fact, that's a reason that a lot of people voted for him. But on the flip side, you have a Fed president, which Donald actually elected back in 2016, who's actually pushing back trying to be a little bit more cautious because they don't want to reignite inflation. They don't want to cause a huge growth in the economy because that growth in the economy likely leads to higher prices down the road along with higher rates. So I'm going to say something really, really controversial right now. In fact, a lot of you are probably going to have an opinion on it, but I feel like it needs to be said. If you're one of those people out there that hates Donald Trump, you absolutely despise him. You can't believe how he got in office. Let me tell you, things probably aren't going to be as bad as you think. But on the flip side, if you're one of those people that voted for Trump because you want lower rates, you need lower rates, you need lower prices, you think he's going to fix everything. Well, things probably aren't going to be as good as you think. And that's because presidents get way too much blame when things go bad and they get way too much credit when things go good. But typically what happens is that president probably falls somewhere in the middle and that's because they're going to be able to appease one side while still disappointing another side because they don't get everything they want. And so what I want to do here is take a little bit of time and actually talk about the policies that Trump is proposing out there and how they could impact mortgage rates for the better or maybe for the worse. Regardless of what you think is going to happen, the reality is his proposed policies will likely shake up the market in some way. So I want to start today by looking at tariffs. Then we'll take a look at and then follow it up by taxes and the role that the Fed might actually play in the bigger picture. But before we dive into that, I'd like to take a minute and ask a favor. If you find any value in my videos at all, do me a favor and hit that thumbs up. And if you want to stay updated on everything housing related, do me a favor and subscribe to the channel. One of the key policy proposals that Donald Trump has been talking about is tariffs and trade policy. So let's start by talking about what a tariff is. A tariff is a tax that a government imposes on something that's these tariffs are essentially a source of revenue for the government. And on top of that, they can be used to actually regulate foreign trade. And one of the things that we've seen a lot out there in the media and the news at the moment is that Donald Trump wants to propose super high tariffs from all of these countries that are importing goods to the United States. In fact, he said that he wants to install a blanket tariff somewhere between 10 and 20% on all goods being imported into the United States with additional tariffs between 60 and 100% on goods coming from China. So let's take a minute and explain how a tariff works. When a tariff is added to a good that's being imported, the person that's importing that good is the one paying that higher price. They're now paying that tariff in order to bring that product into the United States. And we all know how this works. When somebody is now paying a higher price for a good that they're bringing in that they're going to resell, they're going to now raise the price of that good, which means the consumer is now going to pay for that import tax. So by President Trump raising tariffs on imports, it's essentially just getting passed along to the consumer by higher costs, which means as those goods increase in value, we now have inflation going up. But the thing about inflation is inflation is the rate of change. So if we get a one-time tariff implemented on goods being imported, you're going to have inflation that comes to the market for that period of time. Now, if those tariffs essentially stay the same, then inflation doesn't continue to increase, even though the price of that good has been raised. And that's because the price is the price. That's not the level of inflation. Inflation is only there if the price of that good continues to increase over time. But here's what we know. A lot of the goods that we use to build homes actually come from overseas. They're actually being imported into the United States, which means these tariffs are likely to have an impact on building materials, ultimately translating to a higher price, especially when it comes to new construction. But the thing to note here is that new construction is only 8% of the market. It's been a higher percentage over the last couple of years because there's been a lot of people locked into their homes, not willing to sell property. So new construction has been a higher percentage of the market. But on the flip side, existing construction homes that are already built shouldn't really see that same increase in price on goods because that home is already built. You're not doing any construction on that property. Therefore, it's not really impacting the cost. But what I will say is this actually contradicts what Trump said and how he promised to make prices plunge. Because the only real way to make prices plunge is where you have deflation. And typically, the only time you see deflation in the market where you see prices coming down is if you have a huge recession, which means a slower economy, higher unemployment, people are getting laid off, and in some cases, making things worse than higher prices. So there's a little bit to digest in what I just said. If you think Trump is going to come in and he's going to stimulate the economy and he's going to grow the economy and things are going to be doing well, then that likely means higher mortgage rates. Because there's no reason to reduce interest rates when you have a strong economy. If you have a growing economy, then that means the restrictive policy out there isn't really having a negative effect. Therefore, things probably stay status quo. Now, that doesn't necessarily mean that you're going to see higher mortgage rates down the road. But what I will say is a stronger economy doesn't likely lead to lower mortgage rates. But on the flip side, if you're one of those people that believes he can actually bring prices down, he can make them plunge as he promised, then you have to believe a recession is coming, that deflation is going to be part of that, that unemployment is going to go up. And if that happens, then yes, there is a chance that mortgage rates come down along with prices. But at the moment, that's opposite of what the market is actually predicting. And that's why we've seen mortgage rates shoot up so much is because they do believe that inflation is going to come back into the market, that we are going to see some growth in the economy, that we're going to see higher prices because of tariffs. But even with that said, the Fed hasn't completely taken rate cuts off the table, at least for the moment. And that's because jobless claims show extremely low layoffs and little sign of trouble for the US economy. But let's take a minute here and talk about his proposals for mass deportation of illegal immigrants. I personally don't believe illegal immigrants are the reason that house prices are high. I don't believe that they're the reason that supply is low. In fact, I think they have very little impact on the overall housing market as a whole. And that's because most of truly illegal immigrants aren't homeowners. They're not your competition out there in the market. They're not the ones driving up the price of homes. Now, in some cases, they can be renting a or doing something else. So, it might be driving up the price of rentals. But the reality is deportation could have some impacts on the building sector, causing things like wage inflation, which means if you can't hire these undocumented workers, you now have to go out and find legal workers, which likely means that you have to pay a higher wage. But as we discussed earlier, what do you think happens to that increase in wages? It gets passed along to the consumer in a higher price. On top of that, deportation could lead to less workers out there in the industry overall, which means in the new construction world, when you have less workers, that means less homes being built. And at the moment, based on the latest data, we're around 3.7 million homes short here in the United States. So, the last thing we need is the new construction sector to slow down anymore. Because what this ultimately does is put cost pressures on house prices. Because if it's more expensive to find good workers and you have less of them now, you're likely not only paying a higher wage, but you're building at a slower pace. And all this does is put additional pressure on the housing market, likely leading to higher prices. Now, the first two things that we've discussed are a little bit unknown because we don't know exactly what's going to happen, what's going to be passed. In fact, something that you should keep in mind is that even though Donald Trump is coming in as our 47th president in January, a lot of what he's going to pass, a lot of what is going to happen isn't going to happen immediately. It's going to take days, weeks, months for some of this stuff to actually get through and have an impact on the overall market. So, whether you believe interest rates are going to shoot up or whether you believe interest rates are going to come down, my personal belief is none of this is going to happen very quickly. But here's where we do have a little bit of knowledge. Back when Donald Trump was initially elected president, he passed tax cuts back in 2017 that are getting ready to expire. In fact, whoever became the 47th president was going to have to deal with these expiring taxes. And one thing we know about Donald Trump is he likes low taxes. And one of the beliefs out there in the market overall that these extensions of tax cuts or changes in the tax code is likely going to bring in less taxable dollars. That's why we have some of the federal budget committees estimating that it's going to add about $7.75 trillion to the overall deficit over the next decade. So, the question is, how do you fund this deficit? Well, you fund it by issuing more treasury bonds. And by funding more treasury bonds, the prices on those bonds go down, but the yields have to go up to attract investors, which in turn puts upward pressure on mortgage rates. So, while none of us have a crystal ball as to what's going to happen when Trump becomes president, what's actually going to get passed, one thing we do know about President Trump is he likes to ask for more than he actually wants. In fact, it goes back to his book, The Art of the Deal, when he talks about the idea of negotiating. It's this idea that you ask for more than you actually want by saying, I want 60% or 100% on tariffs or 10% or 25% on tariffs from Mexico and Canada when he only wants a 5% or maybe a 10% increase on these things. And that's because he's trying to make this super outlandish statement where people go, that's crazy, we're absolutely not doing that, but we'll do this. And by this, that's exactly what he wanted to start. But one thing we can be sure of is that President Trump is going to put pressure on the Fed to lower rates. And even though he put Powell in office in his original term, he's gone out on X, formerly Twitter, and said that Powell has a horrendous lack of vision. And no guts, no sense, no vision. And he's also gone on to say that he thinks he has the right to tell the Fed whether rates should go up a little or go down a little because of how much money he's actually made. But while saying this, Powell's basically come out and saying that he's not going to resign from office and that he's going to stay the course. And if Powell actually stays the course, then that means the only way we're likely to see much lower mortgage rates is if we see much lower inflation, higher unemployment, a huge recession out there in the market. So, otherwise, we're likely to see mortgage rates stay in that range somewhere between 6% and 7% until we see a shift in the US economy. Now, this video was all about Trump and mortgage rates. But if you want to see what I believe on Trump and housing prices, do me a favor and check out this video here.