Wednesday, November 16, 2016

Trump Presidency and Real Estate

Trump, a billionaire real estate developer, becoming president of the US has to be a good thing for real estate, right? I mean, what could go wrong?

In reality, I think people tend to overrate just how much change a president can affect. For better or worse, the Founding Fathers intentionally structured our government to be sluggish, or inept to a degree. I doubt Trump will be especially nimble when navigating the political  waters and, subsequently, probably won't end up changing a whole lot.

Something that is relevant to real estate and had shifted drastically since Trump's election is the Treasury yield curve, which has simultaneously shifted upward and has gotten flatter. Yields are a function of the "real interest rate" and inflation expectations. Yields moving higher would imply higher inflation expectations. More inflation is generally a great thing for real estate as it boosts real estate values while decreasing the real cost of servicing debt. The curve flattening is a bit worrisome though as that's generally a negative indicator for the economy. Well, we'll see what happens. Should be a fun / entertaining 4 years...

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