The Truth - How Trump's Policy are Affecting the DC Housing Market

I've had several clients ask about this lately. A few viral tweets showing a surge of homes hitting the market in the first two weeks of February didn't help. But don't panic yet. There's been no surge and, as a matter of fact (ie data from our Multiple Listing Service), counting all active and coming soon listings from  February 3rd -16th (the time period cited in the viral tweets), the DC area saw only a 0.3% bump in homes for sale. For the entire month of February, DC proper saw a total of 786 homes listed (at a median price of $781K), which is higher than February 2024's 728 but seems to be in keeping with the inaugural cycle bump. For example comparing February 2021 numbers (869) to those of February 2020 (765) we saw a year over year bump as well. For the moment at least, the DC area housing market is actually stable and struggling with the usual supply and demand imbalance exacerbated by high interest rates.
How might this change under Trump?

 Federal Workforce Reductions and Return-to-Office Mandates

The DC area is home to about 20% of the 2.4 million members of the civilian federal workforce, which does not include military personnel and postal workers. Approximately 75,000 federal workers accepted the buyout and perhaps as many as 220,000 federal workers are "probabtionary employees" and subject to layoffs. These are big numbers and my heart goes out to all of these folks.  According to the Washington Post, about 373,000 federal employees live in the District, Maryland and Virginia, making up roughly 15 percent of the region's workforce. In DC proper, the federal government accounts for 24.5 percent of jobs and 27.5 percent of wages. 

Additionally, President Trump's executive order mandates a return to in-person work for federal employees. These actions have introduced uncertainty among federal workers, leading some to consider relocating closer to their workplaces or selling their homes due to potential job instability. 

Will this lead to a surge of homes hitting the market like in 2008? Probably not in my opinion. The market crash in 2008 was caused by predatory lending and subprime mortgages putting homeowners in mortgages they couldn't afford. Back then I personally knew several "real estate investors" who owned mulitiple properties that they bought using "no-doc" mortgages, meaning they didn't have to show any income to qualify. Nowadays this doesn't happen. And Investment properties have a higher threshold for qualification than primary residences along with higher downpayment demands. The ease with which people could borrow money created the bubble and their inability to pay their mortgages, the sell off. What we have today is not that. So far, it's a story of continuing limited supply with both supply and demand being tempered by high interest rates and now a whole lot of uncertainty.

Luxury Housing Market Dynamics

The luxury housing segment in the DC area market has actually experienced a notable uptick, often referred to as the "Trump Bump"  Since November 2024, there has been a surge in demand for high-end properties, particularly those priced above $5 million. This trend is attributed to affluent individuals associated with the new administration, including business leaders and consultants, relocating to the area. The influx of these buyers has led to increased sales and a competitive market for luxury homes.

Regulatory Changes and Housing Programs

The administration has also proposed significant cuts to the Department of Housing and Urban Development (HUD), aiming to reduce approximately 4,000 positions. These reductions could impact programs related to disaster recovery, rental subsidies, and first-time homebuyer assistance, potentially leading to delays and disruptions in services. Moreover, HUD Secretary Scott Turner announced the elimination of a federal zoning rule, previously established to promote fair housing practices, arguing that it imposed excessive burdens on local communities. Critics contend that this rollback may hinder efforts to address housing discrimination and affordability.

Construction Costs and Tariffs

The administration's imposition of tariffs on steel and aluminum is anticipated to elevate construction costs for mid- and high-rise apartments, potentially leading to higher rents. Developers may eventually pass these increased costs onto renters or delay new projects, further affecting housing affordability in the region.

Market Stability Amidst Policy Changes

Despite these policy shifts, the overall DC housing market has remained relatively stable. While there is some concern about potential impacts due to federal workforce changes, data indicates no drastic changes in active listings, properties sold, or median sales prices in the area. The market's resilience may be attributed to the diverse local economy and a strong demand for housing. With that said, I am seeing some deals for homebuyers and, at the same time, the better listings are still getting mulitple offers and top dollar. As always, look first to your immediate local market because local markets can vary greatly in terms of supply and demand dynamics.

Thoughts or questions? Shoot me a reply!