As of 2024, mortgage interest rates hover around 6.7%, making borrowing more expensive for homebuyers. While Donald Trump has signaled a desire to reduce rates to levels as low as 3%, these decisions largely depend on the Federal Reserve and broader economic conditions. In the short term, higher rates may deter buyers but also lead to more negotiable prices for savvy investors.
Impact of Labor and Trade Policies
The U.S. real estate market faces a significant housing supply deficit, with estimates ranging from 2.5 to 7.2 million homes. Trump’s policies aim to reduce construction regulations and open federal lands for development, potentially increasing supply in certain regions. However, many of these lands are in areas with environmental challenges, such as water scarcity or wildfire risks, limiting their attractiveness
Housing Supply Shortage
Proposals to limit immigration and impose tariffs on imported construction materials could exacerbate labor shortages in the construction industry, further driving up costs. While this presents challenges, it also creates opportunities for investors to focus on markets with lower construction pressures
Investment Example: Property in Florida
Let’s consider an investment in Orlando, Florida, a top-performing market for rental properties:
Purchase Price: $350,000
Mortgage at 6.7% Interest Rate: Approx. $2,260 monthly payment (excluding taxes and insurance).
Short-Term Rental Income: $3,500 per month on platforms like Airbnb.
Operating Costs: $900 per month (maintenance, property management, and utilities).
Net Cash Flow: $340 per month.
If mortgage rates decline in the future, monthly payments could drop, increasing cash flow and overall investment profitability.
Advantages of Investing Now
Opportunities in Key Markets:
States like Florida, Texas, and Arizona continue to attract significant demand, offering long-term stability and appreciation potential for investors.
Portfolio Diversification in U.S. Dollars:
Investing in U.S. real estate provides a hedge against currency devaluation and a reliable source of income in dollars, an attractive feature for international investors.
Potential for Property Appreciation:
Despite current high prices, localized markets may experience price adjustments due to policy changes or market dynamics, creating buying opportunities with strong long-term appreciation potential.
Flexibility with Rental Strategies
With growing demand for rental housing, investors can choose between long-term rentals for steady income or short-term rentals for higher yields in tourist-heavy markets.