If Donald Trump is elected in November it may lead to higher pricing on imports and reallocating resources into less efficient areas, potentially negatively impacting the commercial real estate market and the U.S. housing market. The issue is because of the likely negative impact on the nation’s GDP as some of the proposed policy positions may be interpreted as increasing the deficit, inflation rate, and debt. This could, in turn, result in an increase of the risk-free borrowing rate and a resulting negative impact on the U.S. housing market and the commercial real estate market alike.
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How Real Estate Transaction Decisions Might Be Affected
If elected, Trump is likely to work to negotiate international trade deals, which could lead to higher prices on imported goods. This would negatively impact the gross domestic product. As interest rates rise, it may limit the expansion of businesses and harm the U.S. housing market. This may make it more difficult to sell properties because of the higher interest rates on mortgages and commercial real estate loans. A Chicago real estate lawyer will be closely watching the climate of the real estate markets in order to advise his or her clients appropriately.
Real Estate Considerations
Real estate transactions are complex. For homebuyers, buying houses represents the biggest transactions many people ever make in their lives. Commercial real estate investors must look at many additional considerations when determining whether or not they should invest in particular properties.
With the current economic and political uncertainty, the interest rate may rise after the election. People who invest in properties must look at how the increased interest rates might erode their returns. An important consideration is the leverage risk, which involves considering how much debt will be taken out in order to buy the property. With higher interest rates, higher amounts of leverage may quickly erode the potential returns because of interest rate exposure.
Investors should also consider the risks associated with a particular type of asset. This involves considering the property types that will be purchased and their associated risks. Special care should be taken to analyze the areas in which the properties are located in order to lessen the chance of purchasing properties that may experience decreases in value or be difficult to keep rented. An additional consideration is the issues that a property has and how they may impact its uses or value.
How the U.S. Housing Market May Be Harmed
Higher interest rates may keep buyers out of the market as they wait for interest rates to go back down. Sellers, in turn, may have homes that remain on the market for longer periods of time before they sell. If rising import prices drive up costs of goods, people may have less money to devote to paying mortgages, especially if higher interest rates translate into higher monthly payments. A real estate lawyer may advise his clients, whether they are buyers or sellers, about handling their real estate transactions in manners that are designed to best protect their interests.
What Trump’s Election Would Not Mean
When there is a lot of uncertainty about what the future holds, people tend to be reticent to invest or to engage in large transactions such as those involving real estate. People should not simply stash away money in low-yield savings accounts. Instead, they should make certain to conduct the research that is necessary about the properties that interest them so that they can make better-informed decisions. This may include investigating the property values in the areas in which homes are located as well as their historical values. People may want to review neighborhood crime data and complete title records searches for the properties. These are all important aspects of real estate transactions that people should take even when the times feel more certain.
Before interest rates increase further, it may be smart to look for properties now instead of later. Trump has repeatedly indicated that he believes that the Federal Reserve should increase interest rates further. It might be a good idea for prospective buyers to take that into consideration when they are thinking about the timing of their planned real estate purchases. A Chicago real estate lawyer may help his or her client with investigating the various issues of a potential home or property so that his or her client has all of the information that he or she needs in order to make a good decision about whether or not entering into a real estate transaction is a good idea.
One final consideration concerning the impact of interest rates involves more than the mortgage payment. Interest rates may also impact the flow of capital, which can, in turn, impact the value of properties.