New Presidencies and Washington-area real estate

Since the November election, many of our clients have asked us about the impact of the Presidential election on the local real estate market. Each change in administration does have an impact on local real estate, but a second Trump administration is likely to produce some outsized changes.

Administration changes, by the numbers.

It is a popular opinion that any change in Presidential administration energizes the Washington-area real estate market. In reality, the impact is much more muted. Real estate transactions directly related to any new administration only represent a small percentage of transactions in the market.

In a new Presidential administration, there are about 8,000 politically appointed positions being filled within the Washington DC area. Even with a change in political party, not all individuals holding these positions will change – some individuals with the prior administration will stay on, regardless of their party affiliation. Next, many potential political appointees already live in the Washington area – as they step into their positions, they will have no effect on the local real estate market. For those that do move from out of town, many will have a higher propensity to rent rather than buy if they don’t plan to stay in the area beyond the end of the presidential term. They will have no effect on purchases and sales in the area’s residential real estate market. In sum, total administration-related purchase volume will be far below 8,000.

We believe that out of the 8,000 appointed positions, about 1,000 appointees will relocate to the Washington, DC area and purchase homes here. By contrast, 47,564 homes changed hands within the local market in the past year. As a percentage, the political appointees would equate to about 2% of that market. This represents a slight increase in volume, but it is not a dramatic shift.

In short, a new administration does lift transaction volume, but not in a significant way.

Real estate impacts specific to the Trump administration.

A second Trump administration promises to be different from any other new Presidential administration. How might specific policies or characteristics of the administration affect residential real estate in the Washington area?

President-elect Trump has promised much higher tariffs on imported goods. By nature, tariffs are inflationary, and inflation directly impacts interest rates. Higher mortgage rates, driven by tariffs, could make homes more expensive for buyers, slowing the residential real estate market.
Donald Trump has signaled his desire to shrink government and possibly relocate government agencies outside of the Washington area. Lower government employment would have a negative impact on local housing demand, weakening the market.
A new Trump administration may have a singular impact on the Washington area’s high-end real estate market. At least 9 of his appointed administration officials are billionaires and their total net worth exceeds $346 billion. While our region has historically been home to billionaires and other high net worth individuals, this influx of wealth into our region will be unprecedented. As the Washington area’s billionaire population dramatically expands, these individuals will tap into the region’s luxury real estate market for homes. Expect opportunities for developers of ultra high-end properties.
In the new administration, the government relations industry is likely to expand, adding more high-end jobs. In an administration promising big changes, corporations and industry groups will likely increase their Washington presence to protect their interests. An increase in government relations professionals will have a positive impact on real estate demand, particularly at the high end.
Back-to-the-office orders could revitalize downtown DC real estate. The new administration has promised to end or limit telework among Federal workers, and this could re-energize the downtown area’s restaurants and service businesses. In turn, this will have a positive impact on residential real estate in the downtown area.