How Trump could affect the San Francisco real-estate market

SF Market Scoop

November 18, 2016

How Trump could affect the San Francisco real-estate market


For the first-ever real-estate mogul president-elect, Donald Trump spoke very little during the campaign about his housing policies.

“I cannot recall Mr. Trump explicitly connecting his experience with real estate to how he will handle housing policy during his presidency,” said Nela Richardson, Redfin’s chief economist.

That being said, given how outspoken Trump has been on various other topics—such as trade, immigration and deregulation—Richardson, as well as a few local experts, have their guesses about how the impending Trump presidency could affect the market moving forward.

Mortgage rates 

We won’t have to wait until January to see how Trump affects the mortgage market; mortgage rates have already climbed half a percent in the week since the election, as investors take their money out of bonds and head back to the stock market.

Richardson points out that a 4 percent interest rate is still very low historically, and shouldn’t impact the market much unless it continues to get significantly higher at a rapid pace. That substantial increase could certainly happen if there is a move to privatize beleaguered financial services agencies Fannie Mae and Freddie Mac, she said.

According to Patrick Carlisle, chief market analyst at Paragon Real Estate, with affordability already problematic in the high-priced Bay Area, every uptick in the mortgage rate could mean more people priced out of homes.

“Interest rates are a huge concern,” he said. “In the Bay Area housing affordability is one of our biggest social, economic and political issues. If interest rates go up dramatically, that will dramatically affect housing affordability for the worse. For example, rates a couple weeks ago were in the 3.5 percent to 3.6 percent range. If they jumped to 4.5 percent, that’s a 25 percent increase in interest rates for the average home buyer, who is already having issues affording Bay Area homes, especially in its most expensive areas.” 

Foreign investment

Trump’s push for exclusionary immigration policies could have a big impact on foreign investments in the market nationwide.

“Right now, U.S. real estate is looked upon as a safe haven investment for foreign buyers,” said Richardson. “Any uncertainty created around the safety of that investment, such as concerns about the ability to liquidate their assets or even occupy their homes could cause shocks to the luxury housing market in particular.”

Locally, the biggest factor is how Trump’s anti-Chinese rhetoric might deter investment, said Carlisle. “If the Chinese start believing they’re not welcome or safe here, they will stop coming here, sending their kids here for college, and investing here, immediately,” he said.

But Selma Hepp, chief economist at Pacific Union (which opened a “Chinese Service Concierge Desk” in San Francisco in 2014) believes that Trump’s real-estate background will lead him to realize the importance of foreign investment in real estate and she was hopeful his administration would understand “the value of high-skilled immigrants, the spillover effects and their impact on the economy.”

In short, any fear from Chinese investors may be short-lived. “We may see some trepidation from Chinese buyers and they may frankly look to other markets, such as Canada (though they are already have large presence there), but I think when we get a clearer picture of what the immigration reform entails, those Chinese investors will return,” she said.

A certain uncertainty 

Trump has already begun to pull back on some of his campaign rhetoric after his victory, which left our experts wondering how much of what he said on the campaign trail would actually come to pass. Richardson, for one, was hopeful that the promised return of jobs to “Rust Belt” states would help the still-struggling housing markets there. “Unlike cities along the East and West coasts, time won’t fix these communities, only jobs will,” she said. “They need our attention and reinvestment in their local economies before homeownership can become a great investment again.”

But if Trump follows through on his promises to revise trade policies and bring those jobs back to the U.S., California’s economy is sure to be affected, argued Hepp. “The Chinese government is very concerned about Trump’s ideas on trade agreements and what he wants to do with them,” she said. “As I wrote in my article, it is particularly concerning for California since so much trade passes through California’s ports and foreign investment from East Asia is largely focused on California.”

And while Richardson was also hopeful that Trump’s emphasis on deregulation as well as his real-estate background might lead to an easing of restrictions on development, and therefore more housing, Carlisle didn’t think any changes on a national level would have much impact locally. “Our market and all its regulations—code, environmental, planning review, and so forth— and political resistance to development are all set locally or on the state level,” he said.

In fact Carlisle’s overall view on Trump echoed many in the Bay Area this past week: “Pray that Trump isn’t going to be the president he has promised during his campaign that he will be.”

Emily Landes is a writer and editor who is obsessed with all things real estate.


Skip to content