2024 Election Impact: Huntsville's Real Estate Forecast for 2025

The potential impact of a Trump presidency on real estate in Huntsville, Alabama, is shaped by various economic factors and policy decisions. Unlike 2016, today's landscape includes higher mortgage rates, inflation concerns, and significant national debt. Understanding how these elements could influence interest rates and home values is crucial for buyers, sellers, and investors. Interest rate movements hinge on multiple scenarios, including Trump's possible influence over the Federal Reserve and broader economic policies. Housing values, on the other hand, may be affected by affordability challenges and policy shifts. Insights into these dynamics provide a clearer picture of what Huntsville’s real estate market could look like in 2025.

Interest Rates and Their Potential Increase

Much has changed since Trump’s initial term in office in 2016. The world is now a very different place, and several potential scenarios could unfold over the next four years. Interest rates could either rise or fall, and there are arguments for both possibilities.

When looking at potential rate increases, we can consider recent trends. The odds of Trump winning the election have correlated with an increase in the ten-year Treasury yield, which is tied to 30-year mortgage rates. As the likelihood of Trump's victory grew, so did mortgage rates. This trend continued after the election, supported by a strong stock market that put upward pressure on bond rates, ten-year Treasury yields, and 30-year mortgage rates.

Looking at economic policies Trump aims to implement, such as tariffs, there could be both short-term and long-term inflationary effects. These effects could influence the Federal Reserve’s approach to interest rates. If Trump’s presidency is viewed as beneficial for the economy, it could lead to increased inflation and compel the Fed to adjust its rate policies accordingly.

Potential for Interest Rates to Decrease

When it comes to interest rates potentially going down, Trump has expressed a desire for greater influence over the Federal Reserve. If he manages to replace Jerome Powell or exert influence over him, interest rates could drop. The Federal Reserve is already on a path that points to rate reductions. They previously made a half-point rate cut, followed by a quarter-point cut shortly after the election.

There are more rate cuts predicted and scheduled for 2025. Although Federal Reserve rate cuts do not directly impact 30-year mortgage rates, they can play a role in shaping them. To evaluate the potential for lower rates, it is important to consider Trump’s stance and the Federal Reserve's current actions.

Interest rates could move in either direction, but considering the data, there is a likelihood of rates dropping in 2025. If current 30-year mortgage rates are around 7%, they could fall to the mid-5% range, or at worst, the high-5% range. This points to a probable decrease in interest rates for 2025.

Factors That Could Lead to Increased Housing Values

Looking at the voting trends across the state, about two out of three Alabamians supported Trump. This enthusiasm from his supporters is already influencing the market, potentially driving more showings, new contracts, and additional sales. Many people had been waiting for the election to make decisions, and with the election now behind us, that initial boost is already underway. For example, showings surged the weekend after the election, partly because it marked the end of the waiting period for many.

In addition, the excitement from the two-thirds of Alabamians who supported Trump could lead to optimism about the economy in Alabama for 2025. Past trends also support this potential. While the world has changed significantly since 2016, it is worth noting that mortgage applications rose after Trump was elected that year. If a similar trend occurs, it could benefit home values in Alabama, especially in Huntsville.

There is also the issue of potential sellers who have been sidelined by the mortgage rate lock-in effect. Approximately 2.5 million would-be sellers have refrained from listing their homes over the past two years due to high rates compared to their current low-interest mortgages. If rates decrease even slightly in 2025, and even if only 20% of those homeowners choose to sell, that could mean an additional 500,000 homes on the market, significantly impacting the real estate market both locally and across the U.S.

Another major factor to consider is Space Command. Many believe Trump will announce that Space Command will be located in Huntsville. Given Huntsville’s reputation as Rocket City, this would make sense and could result in a booming housing market driven by the influx of new jobs and economic activity.

Why Housing Values Could Decrease

There is a case for home values potentially declining in 2025, which could lead to a recession across the U.S. The first major factor is affordability. In 2016, the average monthly mortgage payment was about $1,200, while today it is around $2,800. The percentage of income that Americans spend on housing has risen from 24% to an unhealthy 40%, which impacts when and how people buy homes. The average age of first-time homebuyers in the U.S. has also climbed to 38 and has risen sharply over the last few years.

The second point is the economic shift under a Trump presidency. The current economic landscape is different from 2016, and any policy resets aimed at cutting government jobs and reducing spending could have deflationary effects, potentially slowing down the economy and GDP. Tax cuts could lead to a higher deficit, while tariffs may be inflationary. Managing the national debt is another major challenge. This creates a situation where threading the needle with economic policies is difficult and could result in an economic downturn in 2025.

While there are many uncertainties, there are reasons for cautious optimism in the Tennessee Valley, especially if Space Command is announced for the Huntsville area. This could lead to moderate price gains of around 5%, with the potential for higher gains if the economy strengthens under the new administration.

The outcome in 2025 could go either way, but I expect a more typical year with approximately 5% appreciation in the Tennessee Valley.

Whether you’re being relocated with Space Command to Huntsville, are a first-time homebuyer wanting to avoid waiting until 38 to purchase, or a seller looking to benefit from potential home value increases and more showings, we at Matt Curtis Real Estate are ready to help. We are proud to be the number one team in Alabama for the past five years and look forward to serving you in 2025. Reach us at 256-333-MOVE.