The New Deal 2.0
Donald Trump is now the 47th U.S. president, and there is no denying a sense of optimism and hope. While no one knows exactly what will happen, given the wide range of rhetoric during the campaign, the early signs are super bullish, and I will focus on what I think will happen and how it will impact home prices, especially our overseas clientele.
Rates & The USD
While it is assumed that The Fed Funds rate will be cut in 2025, mortgage rates are more closely related to the 10-year Treasury pricing, which has been stubbornly high as the market expects more inflation due to continued and possibly increased fiscal deficits.
Fiscal deficit is essentially paying for goods and services with money you don't have (i.e., printing money). This causes inflation and money debasement.
What makes the U.S. unique is that it benefits from being a reserve currency.
Therefore, higher rates = USD inflows = stronger USD, sucking dollars out of the global money system.
The leading expert on this phenomenon, called the "Dollar Milkshake Theory", is Brent Johnson, Santiago Capital.
We all need a weaker USD, and I think they will make this happen.
There is no policy being suggested by Trump that works with a strong USD, so this is important to watch. Ticker DXY is the Dollar Index, and we need to see this below 100 soon with clear intention towards 90.
The weaker USD gives more economic flexibility to our trading partners (useful when we are trying to negotiate tariffs) and makes our exports more valuable.
That is, a weaker USD is good for global growth, so more of our overseas clients are doing better.
More importantly => Weaker USD gives more flexibility for the 10-year treasury to come down, improving mortgage rates.
A weaker USD makes U.S. real estate more affordable for our overseas clients through the exchange rate.
Economic Growth and Job Creation
Trump campaigned for pro-business policies aimed at boosting economic growth, such as tax cuts or deregulation, which would increase household income and demand for homes, pushing prices upward.
Stargate
Trump announced Stargate, a catchy movie-like name for an AI Infrastructure program which is mega-bullish, aiming to add up to 500,000 jobs over the near term. These new hires will undoubtedly need homes to live in, and being a landlord over the next few years is a big investment opportunity!
Moving manufacturing onshore will increase spending on infrastructure, boosting local economies, particularly in regions benefiting from new projects, and driving up home prices in those areas. See CHIPS Act article from last week.
Tax Policies
Trump may advocate for federal tax policies that favor homeowners, such as expanding the mortgage interest deduction, which could make owning a home more attractive and increase demand.
A reduction in capital gains taxes will incentivize more real estate transactions, increasing supply in the market and potentially moderating price growth.
The New Deal 2.0
Trump has created enthusiasm in the economy on the same level as FDR's The New Deal. A strong perception of economic stability under his leadership could drive more people into the housing market, increasing demand.
Invest in States that see increased manufacturing
Areas with strong economies and high-demand housing markets (e.g., Texas and Florida) could see price growth if Trump's policies favor those regions. These are the markets we are bullish on, and they align with many of the states that are seeing increased manufacturing.
U.S. loan programs created just for you
Global Mortgage Group offers U.S. mortgages for overseas investors with loan programs that use rental income to qualify, known as a DSCR loan, except our programs are created specifically for people like you!
Whether you're an overseas investor navigating policy changes or a first-time buyer seeking tailored mortgage solutions, we are committed to guiding you every step of the way.
Contact us at [email protected], or visit www.gmg.asia to get started.
