What will a President Trump mean for SoCal housing?

Southern California housing under a Trump presidency could see higher mortgage rates but also emboldened builders who hope regulatory hurdles will be reduced, said regional housing experts.

California continues to have some of the highest home and rent prices in the nation, with wages not keeping pace in many metro areas, especially in San Diego County.

While the president-elect did not make housing issues a cornerstone of his campaign, his history as a real estate developer gave some analysts an idea of what his next moves could be.

Home costs

The cost to buy a home could go up if mortgage rates rise, as they have since Trump was elected earlier this week.

Global uncertainty typically pushes international buyers to buy U.S. bonds, which pushes down mortgage rates and makes borrowing cheaper, said Ralph McLaughlin, chief economist of Trulia.

However, with some foreign markets concerned about Trump, it could push investment out of the country.

“The U.S. economy now looks less safe because we don’t know Trump’s policies toward trade,” McLaughlin said.

Yet, sometimes America is the cause and the solution. In 2011, when the debt ceiling crisis led to a credit downgrading of the United States, the global uncertainty (along with fears of a Greek debt default) actually led foreign investors to buy more long-term securities in the United States.

“Ironically, the last time there was a U.S. crisis . . . (it) caused an international financial crisis and people actually came to the U.S. as a result of that,” said Alan Gin, University of San Diego economist.

He said the Federal Reserve may want to raise interest rates in December so it has flexibility to lower them if there is an economic downturn.

McLaughlin said much of the anxiety in places that voted for Hillary Clinton, like San Diego County, could lead to short-term reservations on making big purchases, such as a home.

“There may be this short-term anxiety that may cause some households and investors to restrict their expenditures,” he said of Clinton voters in California. “But, we think that is a perception-driven event and not anything based on fundamental economic policies that Trump may implement — primarily because we don’t know what those are going to be yet.”

Regulations

The president does not have as much influence over regulations, which builders say stifle new housing projects, as do state and local laws. But, that doesn’t mean he couldn’t have an impact.

Experts say Trump could use the Republican-controlled Congress to more easily push any housing agenda across, implement tax breaks for home builders, give states incentive to limit regulations or encourage lending to builders. Additionally, he could exert influence over Fannie Mae and Freddie Mac, the Federal Housing Finance Agency and the Department of Housing and Urban Development.

In an August speech to the National Association of Home Builders, Trump said that 25 percent of the cost of a home is due to regulation.

“I think we should get that down to about 2 percent,” he said, according to a press release from the association.

Borre Winckel, CEO of the Building Industry Association of San Diego, said, for example, changes to regulations with the U.S. Environmental Protection Agency could cut down on costs and time to build. He said that county builders deal with the EPA in the suburbs or unincorporated areas.

“The main complaint in California has always been the overreach of federal regulators.” he said. “Maybe what we gain from a Trump administration is a more commonsense application of rules that are already on the books.”

Winckel said finding a more efficient workflow among federal agencies could go a long way.

“Anyone who processes federal permits in the state of California seems to be spending years, rather than months, in the process,” he said.

Millennial homeownership

Millennials continue to have a strong desire to buy a home but many lack the ability to make a down payment. They can also be burdened by student loan debt, which can delay homeownership.

About 71 percent of non-homeowners with students loans said they believe their education debt has delayed homeownership, said a June study from the National Association of Realtors.

About half of the 3,230 respondents said making monthly payments on student loans will delay ownership by more than five years.

Trump’s proposed plan for student loans during the campaign was to allow borrowers with federal student loans to pay more in the short-term but forgive the debt sooner.

Borrowers would pay 12.5 percent of their income if they select a repayment plan, instead of 10 percent now, and have loans forgiven in 15 years. Right now, under the 10 percent arrangement, it takes 20 to 25 years.

Mark Goldman, finance and real estate lecturer at San Diego State University, said the Trump plan would increase monthly payments that are used to calculate financing, and would make it harder to get a mortgage.

“Driving up the monthly debt obligations drives down (home) affordability,” he said. “Because now you have a greater monthly dept obligation that is diverted away from what could be housing dollars.”

Building

A recent report from the McKinsey Global Institute said California needs to build 3.5 million homes by 2025 to keep costs at affordable levels, but the state is notoriously slow at building.

In San Diego County, the lack of new homes popping up has affected the construction industry where 700 jobs have been lost in the past 12 months.

Trump positioned himself as a deal maker in the campaign and has had some real estate success, including Trump Tower in New York City.

“One advantage that Donald Trump has, when it comes to possibly increasing supply, is that he is a developer,” McLaughlin said,” and he knows the process developers go through to build housing. If anyone knows what that process is like in the federal government, it is our president elect.”

However, the type of housing he has built is not typically affordable for the majority of Americans. For instance, the featured property on Trump International Realty’s homepage is a $7.5 million condo at the Trump International building in New York City.

phillip.molnar@sduniontribune.com (619) 293-1891 Twitter: @phillipmolnar

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