How Trump’s Policies Will Shape Real Estate Investing in 2025

Some exciting things ahead for us. Even though pop the bubble of some people out there going, rates are coming down. That's not happening like that. Just because Trump's in office, he's not going to force Jerome Powell to have rates go down.

Obviously the Biden administration had a big focus on that, creating foreclosure bans and all these things. And I think it's good. Right? There's a lot of, you know, foreclosure backlog. But once Trump brings that out, then all of a sudden we got a supply boost. But the demand is so great that it's not going to make that much of a difference.

There's just too much demand and little supp. And with rates staying higher, the person that has a low rate mortgage that they locked in, let's say in 2020, for 3%, they're not going to sell.

What do you think about, like, the sentiment of, you know, Trump being pro business affecting the housing crisis?

I think it's great that investors are going to have more confidence just knowing that Trump is pro business. He's a real estate guy. He's probably going to enact additional tax benefits that were, that were in place during his last term. And I think that'll, that'll defin. Create a demand for people to get back in the game. Right.

If you are going to be honest with yourself, I think you have to embrace the reality that we're going to be in a higher interest rate environment.

As you know, President Trump just took office and the housing market is experiencing an immediate shift. How will this massively affect every renter, house buyer and real estate investor in 2025? Today, my partners and I, who represent almost a half a billion dollars in multifamily housing, are here to break it down. Okay, we got Mr. Randy Lawrence on zoom here. He's out of Tampa, Florida and he's got Capital Prosperity Capital Partners. And we got Mr. Larry Kite from South Point Capital. Let's jump it off. You know, obviously you got President Trump talking about tariffs, talking about lowering regulations, the ten year treasury, all these different things, interest rates. But Randy, what, what is actually going to happen in interest rates and mortgage rates in the, in the, the country?

Yeah, I mean, I think, you know, looking at the three main areas that I would probably say that we, you know, kind of look at today because you see all this kind of stuff flying around already on the Internet and on TV and whatever. It's like, what's going to happen with the housing market? What do we think about interest rates? And then what about the economy or overall buyer sentiment? And you know, ultimately in interest rates, I know a lot of people have been hoping that 2025 was the time that interest rates have come down. Unfortunately, you know, we saw the bond market and again for people out there listening, the bond market, the ten year treasury, that's what really drives long term interest rates for permanent fixed rate debt for both, you know, multifamily complexes as well as single family homes. And we saw the 10 year treasury was at 380. Trump got elected. There's a sentiment the economy's improving, there's a little bit of a yield term premium, meaning interest rates are going to be higher for longer. And we see the 10 year treasury went up to you know, 480 with even talks of it hitting 5% and then dipping now down to about 4.6 ish. And so I can share a quick chart real quick here, Chatham, which is looking at the forward yield curve. I don't know if you can see that. So you know, this is taking a look at the 10 year treasury where it is today. 4:79, 4:80. Tracking down through the end of this year is the forward look at the 480 mark and then actually bumping a bit higher. SOFRA tracking up here at, you know, four, four and a quarter during that period of time, the Fed governor's projections, they're tracking it to be just under 4% on the Fed funds rate. You know, right now it's four and a quarter to 450. There's been discussions about expectations that the Fed would reduce by 50 basis points. That's in line with, with kind of the thinking. And then if you look at kind of the prediction bank rate mortgage survey, you know, they have it here currently just at 7% by the end of 25, down at 6 and a half. You know, and then again some additional survey on the bond market survey ranging from 3 and a half to 4, 7 5among the various participants. So what I would probably say when you, you know, you come back and look at this yield curve on the forward look is that people that were hoping interest rates were going to be coming down, that's probably not the case in the near term. We've been talking about that to our list and our people and stuff for quite some time over the last 18 months. And what that means is in the housing market, yeah, not 7%, but maybe it's six and a half, 6.4 somewhere there like that you could buy the rate down, you know, so that's what we're going to have to live with right now. And then on the multifamily front, that probably also means opportunity. And what I mean by that is that there are plenty of operations where the debt's coming due and they bought the property and realistically they were hoping, planning, needing for rates to come down enough to be able to refinance on a cash neutral refinance. That's not going to be possible now because interest rates are staying elevated. And so then that owner either has to infuse maybe a couple million dollars or more, depending on the size of the complex, to be able to get a refinance or extension on their loan, or have to sell the project. And so that's going to be a reality that we're going to see more of that coming due. Because one of the things, you know, we talk a lot in the education side of things about off market deals and stuff like that, we've talked to a ton of brokers and that's what's going on right now. They're, you know, BOV and properties working with owners trying to establish value. And that's the nexus is like, could you sell it or could you refinance it? So there's some exciting things ahead for us. Even though pop the bubble of some people out there going, rates are coming down. Like, you know, that's not happening like that. Just because Trump's in office, he's not going to force Jerome Powell to have rates go down.

Right? Yeah, because there's, you know, people are talking about, you know, the foreclosures coming. Obviously the Biden administration had a big focus on that, creating foreclosure bans and all these things. And, and that's, I think it's good, right? There's a lot of foreclosed, you know, foreclosures backlog. But once Trump brings that out, then all of a sudden we got a supply boost. But the demand is so great that it's not going to make that much of a difference. Like you said, it's going to be absorbed very quickly. And so still not looking at this, you know, price decrease, like you said.

Yeah, I don't, I don't see that. And then the other piece, in most major MSAs, you have the Wall street hedge funds that are automatic floor buyers. What I mean by that is in any msa, they're an automatic buyer for, you know, as much as they can get to add to their rental portfolio. And so even if there was a concentration of foreclosures in a particular msa, let's say, you know, Dallas, Atlanta, Phoenix, whatever, just, you know, using bigger markets, they would immediately buy those properties up, not only including the regular buyers who are looking to try to buy a home. So, you know, yeah, the people were thinking there's going to be some type of significant, immediate slide. There's just too much demand and little supply. And with rates staying higher, the person that has a low rate mortgage that they locked in, let's say in 2020, for 3%, they're not going to sell, like, because the new mortgage, I mean, even if they needed to upgrade to a bigger home, they're not going to sell because, like the new mortgage is 6.5, 6.6%. They're not going to be able to upgrade that much bigger of a house because of the cost of the money.

Yeah, yeah, exactly. So, Larry, what do you think about, like, the sentiment of, you know, Trump being pro business affecting the high housing crisis? Because obviously there's got to be some kind of positivity.

Right.

In terms of.

Definitely increases confidence for investors, but, you know, it's certainly better than the alternative. Right? Yeah, but like Randy said, you know, it can't magically change interest rates in the short term.

Right.

But I think it's great that investors are going to have more confidence just knowing that Trump is pro business. He's a real estate guy. He's probably going to enact additional tax benefits that were, that were in place during his last term. And I think that'll, that'll definitely create a demand for people to get back in the game.

Right.

Get back in construction, development, buying properties. Maybe they were sitting on the sideline. But, you know, the reality is there was still a uphill battle with rates and making projects make sense. But, you know, I think you can do that locally in your own business to make deals make sense regardless of what interest rates are.

Right.

There's deals that can be bought below value and increased in value at whatever the interest rate. You just have to factor that into your, to your analysis and underwriting, to knowing what your exit strategy is going to be and not banking it on. Rates are going to always be low like some people did a few years ago, like Randy's referring to.

Yeah, yeah. So, so there's all, there's plenty of opportunity for investors. So there's a lot of opportunity. Home prices are continuously going up and at, at a, at a steady rate. I mean, over the past five years, I think the median home price was $296,000. Today it's 427,000, so 44% increase in five years, you know, and then I think I saw somewhere AI was projecting, you know, 600,000 in the next, you know, five, 10 years or something, you know, so, you know, it's going to constantly increase housing price right now and renters are going to be renting more as well. Right.

So let me jump in on that one topic right there. It's like, you know, the truth is, you know, we have been focused on multi family and, you know, affordable housing because the truth of the matter is as a country, we are becoming a nation of renters. And the predominance of jobs that are produced are in that, you know, call it 40 to 75 thousand dollar range. In most major markets, that person is relegated to renting. They can't afford a $350,000 home, they can't afford a $490,000 home. Where I'm at in the Tampa area, you know, your, your kind of starter home. Two, two is, you know, $400,000 or 380 or something like that. You know, that's not inexpensive. So. And that's the truth. And so you look at that, that's not a problem that's going to be solved at all in the near term in any way, shape or form. And then the other reality is, you know, there's not going to be an onslaught of reinstitution of manufacturing in this country. Even though they're trying to get some stuff back in the battery plants and all this other stuff, the working ELE of this country is still going to be that, you know, service oriented job component for 40 to 75,000. And so that does bode well for, you know, providing quality rental housing. And then what does that mean in the near term with Larry, I would agree totally. It's like we bought deals in 8 to 2018 where the rate was just under 6%. It's like, oh my God. But we, you know, made money on the deal, operated profitably and sold it in, you know, 22, 22 for, you know, eight figures. And so that's real. It's just a matter of, you know, looking at the, the numbers, seeing what works and it's a function of, you know, the price, the cash flow, the interest rate. And so there's definitely opportunity. But it's funny to see how some people, yeah, Trump's going to come in, he's going to lower rates. Yeah, doesn't work that way. Like Jerome Powell. And the treasury is separate from them and then all they control is the overnight Fed funds rate, which then impacts sofra. The bond market is really governed by free market forces of free flow of capital and that's ultimately what's driving long term rates. And so, you know, and Powell is not really friendly with Trump because of their previous negativity and he's already said he's not resigning and his term runs through, I think May of 26, almost a year and a half. So and I'd be shocked because he, I would say Powell's going to stick with it because he wants to pull off the soft landing. He, you know, raised rates highest they ever been and fastest they've been in 40 years. And then to see where it doesn't yield this giant recession that everybody was thinking was going to happen, he'll go down as having successfully navigated that and it'll be an asterisk on the record of him as a Treasury secretary. So it's, you know, and then he.

Can run for president. Yeah, all this institutional money and the big guys, multifamily buyers that put the brakes on when interest rates went up, I mean, at some point they're going to want to jump back in the game. Right. Regardless of what rates are. So what kind of effect do you, how do you see that playing out over the next year or two?

I think, you know, we're probably going to see an increase in deal volume. You know, deal volume in most MSAs down 80% this past year from, you know, previous years. I think there's an increase of properties that do come to the market and in twofold one, you're going to have regular market forces that properties are coming to the market. But then you're also going to have the properties that we said earlier where they have to go to market to sell. And yeah, there is a lot of capital on the sidelines that's going to be ready, willing and able to deploy. And I think, Larry, what you said earlier about sentiment, that does make a difference because if we're in a more normalized environment, meaning, okay, there's, let's say rates are higher than what we'd like, but it's more stable and slightly decreasing. That gives people at least a strong capital structure to underwrite with and to deploy through versus kind of the choppiness that we had and you know, 22, 23 and then uncertainty of 24. So I, I would agree that, you know, there's going to be more capital coming into the market, more confidence coming into the market. But Tom, I think the deal volume will be up and it'll still be down historically because there's still not a misalignment. And Larry, you said this too about the underwriting. You know, the price, cash flow and interest rate, those are the big three components. And you know, interest rates aren't going down, cash flow's not jumping up like we had in whatever 21 where, you know, rents went up in a lot of MSAs by 20%. So price has got to be an effective.

Yeah, yeah. And I know there's another topic is regulations. You know, a lot of people are going off about how, you know, regulations are going to be a big deal and, and really help out a lot. And obviously it's a misperception there. But how, how do you feel like it's going to affect, you know, development for both single family but also multi family? And how does that affect the actual market as a whole?

Well, I mean, you see some of the executive orders he signed. It was a general like, you know, we're going to cause departments to be more conscious, cut regulation, etc. That was just even last night. But there was one information piece I saw on that where it could cut 50,000 from the cost of a new home or 25,000 from the cost of a new home. I think most often, yeah, there will be developers that are going to move forward because, you know, there's less potential regulation. But again, the less regulation is going to move slowly depending on what they do. It's not going to happen in two months just because it's a bureaucratic monster. So I think it's still going to, you know, Trump over a four year presidency is going to have a great benefit for the country because there is going to be policies like that lower regulation Larry mentioned earlier, like the, you know, cutting of taxes. All these things are going to be favorable to induce investment in and stimulate the economy. And so those are going to be positive things. And so I think, yeah, there will be more people that move forward. One of the bigger components though is the cost to capital and that's interest rates. So that is a current constrictor on new development, pricing, all of it, you.

Know what I mean?

And so that's just, I think if you are going to be honest with yourself, I think you have to embrace the reality that we're going to be in a higher interest rate environment. We had the luxury of 40 years of virtually, you know, speaking low interest rate environment or at least, you know, from, you know, late 80s to, you know, 20s, which is almost 40 years of declining or low interest rates. You know, marked by certain moments in there.

Yeah.

So, you know, but look, hey, man, praise God. Embrace the reality of what it is and work, like Larry said, within the construct of what you have. And, you know, if you work at it hard enough and, you know, you kiss enough frogs, you find a prince. Right. You know what I mean? Like it's. Yeah. You know, crap. You find the diamond in the midst of it. You know what I mean?

Yeah.

Don't make long term decisions based on some short term actions. Right. Because we're going to guess what, we're going to have another president in four years, right?

Oh, yeah, for sure. Yeah. I think Trump's going to do great for the country near term. We're not going to see lower interest rates because the economy has maybe better legs to stand on potentially. And so it's going to take more, you know, or some type of other event happening or something that people don't see right now that would cause those rates to come down further. Yeah.

All right. Yeah. Well, it's been interesting discussion. Definitely don't believe everything you see on YouTube or the news except this. But there's a lot of misconceptions out there and I think it's important. Understand supply will increase 2025, but the absorption rate and the demand is still extremely strong. And so prices are probably going to stay the same or rise. And. But it's an amazing time for investors. There's plenty of opportunity for investors to be out there buying deals and making a lot of money on those deals. So. All right, thanks for tuning in. Have a great day.