Home-Buying Strategies in the Trump Era

Fleming: “Rates are likely to continue to rise, although more slowly, so think of this as a call to action, if you are already seriously considering purchasing a home.”

IRVINE, CA—With fiscal expansionary policy expected under the Trump administration, it would probably be wise to consider buying a home sooner rather than later, First American Financial Corp.’s chief economist Mark Fleming tells GlobeSt.com. Looking at three different possible Federal Fund scenarios can give potential buyers a clearer idea of how to assess the situation.

In a recent report from the firm, Fleming’s team “considered the impact to existing-home sales and house-price appreciation of three possible Federal Fund rate levels: no change to the Federal Funds rate, a 25-basis-point increase and a 37.5 basis point increase. For the simulations, we assumed that any target rate change will influence short and long rates equally and increase mortgage rates by the same proportion.” In the no-change scenario, baseline expectations for existing-home sales considering a seasonally adjusted annualized rate of sales is 5.7 million. In this scenario, year-over-year nominal appreciation 12 months following the December 2016 FOMC meeting is expected to be 4.9%. In the 25-bps-increase scenario, existing-home sales are expected to decline to 5.55 million SAAR, and the nominal price appreciation year-over-year growth rate falls to 4%. In the 37.5-bps-increase scenario, existing-home sales are expected to drop to 5.48 million SAAR, and the nominal price appreciation year-over-year growth rate falls to 3.7%.