Homebuyers who thought the election would give them some clarity on the market might be squinting harder than ever. If anything, the future of mortgage rates is about as clear as that cup of day-old coffee. Economists are moving their forecasts upward on potential economic ripples from proposed policies by Donald Trump. Let’s dive into what this may mean for homebuyers and why it might not be as smooth of sailing.

A Post-Election Mortgage Shake-Up

Donald Trump’s election victory has economists reaching for their calculators, and the numbers they’re crunching aren’t looking too rosy for homebuyers. Trump’s proposed policies—highlighted by steep tariffs and sweeping tax cuts—could create a financial environment where mortgage rates climb even higher. Bloomberg said the changes have led several analysts to revisit projections for the housing market.

Redfin, one of the biggest real estate platforms, wasted no time revising its forecast. The company had previously estimated an average mortgage rate of 6.1 percent in 2025. Post-election? That number jumped to 6.8 percent faster than you can say “policy pivot.” According to Redfin’s chief economist Daryl Fairweather, a possible return to office by Trump is a key factor in the adjustment. But as she points out, forecasting Trump’s moves is a bit like long-term weather forecasting—you can get it right, but you are more likely to get wet.

Higher Mortgage Rates: The New Normal?

Another heavyweight in the forecasting game, Capital Economics, also thinks mortgage rates are likely to stay around 7 percent for the foreseeable future. As economist Thomas Ryan says, buyers should steel themselves for a long-term scenario in which rates barely budge. The best-case scenario of a quarter-point drop by the end of next year is little more than slight relief.

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Why the Pessimism?

It all comes down to the domino effect of Trump’s proposals. His call to slap up to 20 percent tariffs on all imports—and a whopping 60 percent tariff on goods from China—could ignite inflation. If tariffs sound like some fancy economic term, think of it this way: it’s your favorite coffee shop suddenly charging you triple for a latte because they’re getting milk from overseas.

The costs trickle down, and here the inflation trickles up.

Tax Cuts: A Double-Edged Sword

Tax cuts are always a crowd-pleaser, right? Not so fast. While slashing taxes may leave more money in consumers’ wallets in the short term, it could also lower fiscal revenue and balloon the national debt. And when Uncle Sam’s credit card balance gets out of hand, interest rates—like a grumpy landlord—tend to go up.

In the bond market—where the serious money is won and lost—the reaction to Trump’s proposals has been instructive. Unlike the stock market, which briefly surged after the election, bonds have been much more circumspect. Economists at Barclays raised their inflation projections for the next two years, anticipating that tariffs will give prices across the board a noticeable boost.

The Conundrum of Construction

Now let’s discuss another unintended consequence of the Trump policies: what might happen in the construction industry. The president-elect has promised to crack down on undocumented immigration, and it may reverberate throughout the workforce. Construction is already suffering from labor shortages and depends on a high level of immigrant labor. Deportations will slow down building projects, tighten inventory, and raise home prices.

With fewer homes on the market comes higher competition, and buyers just might find themselves priced out of the game.

Think about it: You are at an auction, and there are only two paintings left. The crowd goes wild, and the prices go up. That could be what the housing market might feel like if construction slows down to a crawl. And that is bad news for buyers, worse for first-time homebuyers already stretched thin.

Where We Are Now

But mortgage rates were already going up before the election, and Trump’s proposals are just one villain. Rates for a 30-year fixed mortgage reached as high as 6.90 percent for the week which ended on November 15, up for the fourth week in a row according to the Mortgage Bankers Association. That’s a long way from rock-bottom rates during the height of the pandemic.

But why would the rates go up in the first place? The answer is: inflationary fears and economic uncertainty are the chief culprits. Think of mortgage rates as the tide; when the tide of inflation and economic turbulence rolls in, so go the rising rates. And for the buyers, the shore isn’t getting any closer.

How This Could Play Out

So, what does it mean for the average homebuyer? The ending to this housing market fairy tale may not necessarily be one of “happily ever after.” With a higher mortgage rate, homes are less affordable, having higher monthly payments. When you add higher home prices due to limited inventories into the mix, it’s truly a double whammy for someone looking to buy.

A simple example puts it into perspective: Suppose you’re eyeing a $300,000 home. At a 6 percent mortgage rate, your monthly payment, not including taxes and insurance, would be about $1,799. But if that rate jumps to 7 percent, that payment rises to $1,996. Over 30 years, that extra percent could cost you tens of thousands of dollars. Ouch.

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A Silver Lining?

Is there any good news? Well, not all economists agree these impacts will cut so deep. Some say the housing market is resilient enough to brave this storm. If you have cash in hand, higher rates might translate to less competition since few buyers will dare jump into the market. Besides, Trump’s proposals are just that—proposals. The political landscape is never predictable, and not all policies make it from campaign rally to reality.

Patience and strategy might still serve buyers well in this market, particularly those who would go out of the competitive areas or consider other financing options.

The Bottom Line

Trump’s economic policies could have a ripple effect that makes buying a home more difficult. Higher mortgage rates, possible inflation, and reduced housing inventory are just about everything you don’t want when trying to buy a house. But as with any market, a little preparation can go a long way. If you plan on buying a home, this is the time to make sure your financial tools are sharp and ready for action, and that you have a strong plan in place.

And hey, if all else fails, maybe consider a houseboat? At least then you won’t have to worry about property taxes—or tariffs.

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