Investing.com -- Recent U.S. policy changes are expected to influence the housing market in multiple ways, with a mixed impact on affordability, supply, and demand dynamics.
While interest rates have stabilized after a period of volatility, the broader economic landscape remains challenging for potential homebuyers.
The marginal decline in rates offers some relief, but affordability remains constrained, particularly for first-time buyers, Wells Fargo noted.
Despite efforts to stimulate new construction, housing supply remains constrained.
Regulatory hurdles and rising material costs continue to limit new developments, exacerbating the supply-demand imbalance.
Wells Fargo notes that even with recent policy incentives aimed at boosting construction, supply growth is unlikely to match demand in the near term.
Although certain tax incentives and federal assistance programs have been expanded, these measures are not expected to significantly alleviate affordability challenges.
“Reduced tax rates, deregulation and other potentially growth-enhancing policies could boost housing demand over the long run,” Wells Fargo’s Charlie Dougherty wrote.
Mortgage rates, which spiked in 2024, have shown signs of easing, but remain elevated compared to pre-pandemic levels.
Wells Fargo points out that while rate stabilization helps, potential buyers are still adjusting to a higher-rate environment, impacting overall demand.
"Material relief in terms of housing affordability does not appear to be on the horizon amid elevated mortgage rates, rising home prices and increased home insurance premiums," the analyst at Wells Fargo said.
Investor activity in the housing market remains elevated, contributing to price pressures in key markets. Policies aimed at curbing speculative investment may have a moderating effect but are unlikely to reverse the trend in the short term.