2025 – The year politics officially took over the housing market

While walking my dog and staying extremely vigilant about not stepping on a snake, I was listening to The Housing Wire podcast this week and Logan Mohtashami, their lead analyst said, “Liberals are crybabies and Conservatives are liars.”  Even Rocky’s ears went up at that. Today’s let’s talk about how much you should let current events and politics impact your real estate strategy…if you have a choice at all.

Trade Deals

Logan was talking about the trade deal Trump struck with China. You might recall that there were some conspiracy theories circulating about Trump’s intentions behind this trade war. If you didn’t hear about these, you can check out my post about a potential method to his madness. One of the more popular theories from conservatives was that Trump initiated these wild tariffs so that the US could refinance its enormous amount of debt at lower interest rates. He even floated the idea, amidst his anger towards Powell, of negative interest rates which would be wildly beneficial to a debt-heavy government. It was an interesting theory. Disrupt short term growth (and people’s retirement plans) to force rate cuts, then ride a wave of cheap money and economic recovery heading into re-election. You could call it shock therapy and fits the narrative that Trump uses chaos as a tool for leverage.

Except we started striking tariff deals this week.

First was China. Trump agreed to cut tariffs on Chinese imports from 145% down to 30% for the next 90 days. The UK and India are also nearing agreements with us. More notably, those two countries finalized a bilateral trade deal that is “the biggest and most economically significant trade deal the UK has done since leaving the EU” and is expected to change the game on trade and investment between India and the UK. I digress, but long story short – as markets are rallying on this news, it looks like the trade war was never about rates or a master plan, just nationalism and optics.

Impacts on Real Estate

We were hoping that the economic uncertainty would drive investors towards mortgage bonds and in turn bring down interest rates. This is why recessions are typically good for the real estate market – lower rates and a safer asset class (not just for bond investors but homeowners as real estate values historically trend upward) are the perfect combo for home sales. Instead, it looks like the “Sell America” trade sentiment could actually do the opposite. Global investors are pulling back from US Assets and as that foreign capital becomes more hesitant, it could tighten liquidity across financial markets...including the demand for mortgage bonds. This would result in higher, not lower interest rates.

Where is the opportunity?

I love to make predictions. And yes, given the frequency of my doing so, the odds of me being right versus wrong are pretty all over the place. The one I stand by is that much of your competition is currently frozen. I think this Spring/Summer buying season will be historic because it is the biggest opportunity zone buyers have seen since 2010.

I was graduating college and broke during the Great Recession. And that is the biggest financial mistake of my lifetime. I have a client who is an electrician. He is also a millionaire. In 2010 he bought a couple of properties in Sparks for about $100k. When I met him, years later, he was refinancing those properties which were worth $300-$500k. He had already been cash flowing well enough on his rentals to pay for his entire primary housing expense. But he cash out refi’d them to move into the home of his dreams and get this, they were still cash flowing because rents had also gone up during that time.

If you have to deal with higher rates now, understand that is keeping a lot of your competition out of the game. Not all of it – it’s been a remarkably busy year so far, in spite of all this chaos. Even if you don’t buy into my theory that this is our window of opportunity, it is 100% a window of stability. Rates are not 5 but they’ve stopped bouncing up above 7%. The devil you know is better than the one you don’t, so if you can lock in your strategy now – you should. That’s the thing about real estate, unlike your stock market investments or the access you have to your retirement funds, you can control your outcome here. You not only decide when to buy and when to sell, you decide whether or not to force appreciation on the property, you decide whether or not to increase or decrease rents, you decide whether or not to have roommates to help with the mortgage. This is one of the only asset classes where you have that kind of authority.