Trump Policy Takes Center Stage

Economics
Published

NAHB Chief Economist Robert Dietz recently provided the following economic overview in his bi-weekly newsletter Eye on the Economy.

The Trump 2.0 administration is underway and disruption is the word of the day in Washington, D.C. The new Trump team hit the ground running, with policy action expected in the areas of regulatory reform, a smaller and more efficient federal workforce, extension of the 2017 tax cuts, tariffs as revenue generators and negotiation tools, and more to come on immigration actions and a more secure border. The sheer breadth of policy actions is a lot for the economy to digest.

Impact on the Current Housing Market

These policies will offer home builders and remodelers both positive and negative risks in the months ahead. This dual set of risks has been reflected in financial markets, with stocks valuing the focus on growth and efficiency but the bond market reflecting inflation and budget deficit concerns. As a result, investors have pushed long-term interest rates higher since last fall, with the 10-year Treasury rate in the 4.5% to 4.6% range, somewhat off the recent high of 4.8% set in January. Mortgage rates remain elevated near 7%.

Home price growth is slowing due to poor housing affordability conditions, high home prices and elevated construction costs. The Case-Shiller home price index increased at a 3.75% rate for the most recent data in November, down from a peak 6.54% growth rate in March 2024. Existing home sales volume slowed in 2024 to a nearly 30-year low, with just 4.06 million sales. Single-family inventory remains low at a 3.3-month supply.

This lean level of resale inventory continues to support new home sales volume. Sales of newly-built single-family homes in 2024 were 2.5% above the 2023 total. Inventory is elevated but justified given the lack of older homes available for sale. New home inventory stands at an 8.5-month supply, but the combined new and existing home inventory measure is just a 4-month supply, well below the balanced market threshold of six months. Nonetheless, completed, ready-to-occupy new home inventory is up 46% over the last year.

What to Expect Going Forward

NAHB projects more economic growth in the quarters ahead, albeit with some disruption in the presidential transition. There is a solid base to build on, with fourth quarter GDP growth coming in at a better-than-expected 2.3% annualized rate. Housing's share of GDP registered at 16.2% at the end of 2024.

The Federal Reserve is undecided on future risks to both inflation and unemployment and will likely hold the federal funds rate at the current top target of 4.5% until at least the third quarter. Future rate cuts will likely depend on 2025 fiscal policy actions, including the size of the deficit. Government spending cuts would help reduce long-term interest rates and be a net positive for housing market conditions.

However, home sales and building conditions will depend greatly on which policies are for negotiation (such as a proposed 25% tariff on Canadian and Mexican imports) and which policies are intended to be long-term changes to the economy (regulatory reform, for example).

Tariffs on Canadian lumber are a near-term concern, with the existing duty rate speculated to increase from a current 14.5% rate to near 30% later this summer. With an additional 25% tariff on top of that, it would put the tax on Canadian lumber at near 55%. This is why regulatory reform that reduces the cost of land development, home construction and remodeling is now even more critical for improving housing attainability.

Subscribe for free to the Eye on the Economy newsletter.

Subscribe to NAHBNow

Log in or create account to subscribe to notifications of new posts.

Log in to subscribe

Latest from NAHBNow

Material Costs

Aug 29, 2025

NAHB's Monthly Update Features Canadian Lumber Duties Talking Points

The update provides the latest messaging framework to help members articulate housing priorities and latest news related to the Canadian lumber imports and builder sentiment.

Advocacy | US Economy

Aug 28, 2025

Podcast: Congressional Priorities and the Trump Economy Heading into Fall

On the latest episode of NAHB podcast Housing Developments, NAHB CEO Jim Tobin and COO Paul Lopez discuss how the rest of the year looks as Congress gets ready to return to Washington next week.

View all

Latest Economic News

Economics

Aug 29, 2025

Multifamily Absorption Rises in the Second Quarter

The percentage of new apartment units that were absorbed within three months after completion rose in the second quarter, according to the Census Bureau’s latest release of the Survey of Market Absorption of New Multifamily Units (SOMA).

Economics

Aug 28, 2025

Mortgage Rates Move Lower, Hitting 10-Month Low

Average mortgage rates in August continued their steady decline and are now at their lowest rate since last November.

Economics

Aug 27, 2025

Wood-Framed Home Share Increased in 2024

Wood framing continues to dominate the U.S. single-family home construction market, according to NAHB analysis of 2024 Census Bureau data.