Expect the Unexpected: Anticipating Volatility in the Housing Market

As we look toward the next presidential term, a recurring theme is emerging for homeowners and homebuyers alike: expect the unexpected.

From anticipated shifts in federal policies to market reactions, the housing market is likely to experience volatility in the coming months. Let’s explore what to watch for in this dynamic environment and how homeowners and potential buyers can prepare.

What to Expect After the Election

Historically, home sales have shown resilience after presidential elections, often bouncing back despite the initial jitters that come with a change in administration. After all, the housing market is fundamentally driven by demand, interest rates, and supply—factors that are often only tangentially affected by political changes.

However, in the wake of this particular election, with a “red sweep” across the government, there may be significant shifts in housing policies that could either stabilize or further stir the market.

Anticipating Market Volatility

With the recent change in administration, analysts expect some early turbulence in the housing market. Already, President Trump’s return has driven up the 10-year Treasury yield, which in turn pushed the 30-year fixed mortgage rate above 7%—a significant increase from earlier this year. This jump underscores the sensitivity of the housing market to shifts in government leadership, especially when new policies affect inflation, interest rates, and economic stability.

Housing affordability remains a top concern for many Americans, yet experts question whether recent proposals will truly address the underlying issues. Ken Johnson, a finance professor and real estate economist, notes, “Both Republicans and Democrats have introduced proposals that sound good on paper, but unfortunately, they haven’t done enough to address the housing shortage over the last decade.”

Most economists agree that the core issue driving the affordability crisis is a severe housing shortage, with an estimated gap of 2.5 to 7.2 million homes over the past decade. This shortfall has been exacerbated by both geographic limitations and regulatory barriers that have constrained housing development in high-demand areas.

While Trump’s plan to reduce regulations for homebuilders could yield some modest gains, other proposals—like large tariffs and mass deportations—could inadvertently worsen supply issues. Economists caution that these measures might introduce new challenges for the housing market rather than providing solutions. A more comprehensive approach is likely needed to address the root causes of the housing crisis, such as affordability and availability.

Key Factors to Watch in the Months Ahead

1. Federal Reserve Meetings

The Federal Reserve plays a major role in shaping the housing market by adjusting interest rates to combat inflation or stimulate growth. Following the recent election, many analysts are closely watching the Fed’s next moves. Should inflation remain stubbornly high, the Fed may keep interest rates elevated for longer, which would continue to influence mortgage rates and overall affordability.

2. Policy Impacts on Inflation

High inflation has been a major factor in the recent rise of mortgage rates, and President Trump’s administration has hinted at multiple strategies to combat it, from deregulation to tax incentives. However, balancing economic growth with inflation control is a delicate process, and homeowners will likely see some level of volatility as these policies take shape. While these steps aim to bring inflation under control, short-term increases may still impact affordability, especially as new initiatives like tariffs and immigration policies influence prices.

3. Supply and Demand Shifts

President Trump’s administration has indicated a strong interest in expanding housing by opening limited areas of federal land for development. This approach could improve the supply of homes for first-time buyers, although it’s unclear how quickly these policies would take effect. Additionally, the administration’s stance on controlling immigration is positioned as a solution to reduce housing demand pressures. However, only time will tell if these measures will substantially lower home prices or merely add complexity to the market.

Preparing for the Future

With so many moving pieces, it’s vital to stay informed and plan accordingly. Mortgage rates, housing policies, and affordability are all subject to change, and understanding these factors will be key to making informed decisions. At Luminate Home Loans, we’re here to provide guidance through the ups and downs of the market. Our team of experts can help you navigate these uncertain times, from finding the right loan options to offering insights on what new policies could mean for your homeownership goals.

While we may not know exactly what’s coming next, preparing for potential volatility can help you make smart, sustainable choices. If you’re considering buying a home or exploring refinancing options, reach out to us at Luminate Home Loans. We’re here to support you every step of the way in your journey to homeownership—whatever the future holds.