The Ticking Time Bomb Many Believe Could Destroy Trump’s Second Term

Are you in the market for a new home? If so – congratulations, you are one very fortunate American. The cost of housing is skyrocketing with both rent and new mortgages far outpacing growth in real wages. President-elect Donald Trump rode economic insecurity to a second term, particularly the focus on rising grocery prices. He assured Americans that he had a cure for an inflation problem that had largely been abated in an economy that many called “the envy of the world.” Now that the focus has turned away from the campaign the markets are already rattled by the threat of tariffs on the horizon. That threat is pushing up bond rates, which is pushing up new interest rates, which push… Well, a housing crisis might soon blow up and that – you will note, is one way to blow up a second term. Fast.

The Washington Post reports that interest rates on new mortgages are indeed up due to rising bond rates. Even worse, both are up at particularly bad time for new homeowners:

“The housing crisis is real. It’s one of the worst times to buy a home in 40 years. The median home price is now $420,000, nearly $100,000 more than four years ago. Mortgage rates are also up significantly from 2020. And nearly everyone agrees that the United States is short millions of homes.”

Yes, that is up over 25% in four years even if scoring in Florida where the cost of new homes is likely even higher – just don’t ask them to do the math. You did also see that this comes at a point when the U.S. is already short of homes. Yes – already, even prior to quickly moving to forcefully deport undocumented workers who make up a large segment of construction sector, and even prior to tariffs come down on everything from Canadian lumber to all the IKEA stuff every self-respecting new homeowner demands.

Trouble brewing because of one thing of which we can be certain. When Donald Trump says he is going to deport all undocumented workers and levy tariffs on imported goods – he generally does, in fact, do what he says he’ll do. And no, Mexico won’t be paying for it.

“High housing costs have become part of the economic ‘vibes’ — alongside gas and grocery prices — that people see on a regular basis. It’s easy to check housing apps for the latest prices. People who own their home and have a low mortgage rate feel stuck, and people who haven’t been able to buy yet worry they will never be able to own now.”

But now they won’t have Joe Biden to kick around for it, nor will they have Kamala Harris’s plans to build five million new homes and give $25,000 in new tax breaks to first time home buyers. It is on Donald Trump and his team and the landscape doesn’t look good:

“Solving the housing crisis requires lower mortgage rates and building more homes,” she wrote. “Trump can yell at the Fed for lower rates, but the bond market is what will move mortgage rates up or down. Right now, the bond market is watching every Trump move for signs of inflation and largesse. And so far, that’s what it sees.”

Signs of inflation and largesse? Recall that the first Trump term was not even slightly thrifty, he drove up the deficit even prior to COVID driving everyone indoors. By the time the election rolled around inflation had been capped but it took years of aggressive interest rate hikes by a very disciplined Fed Chief Jerome Powell – who Donald Trump appointed, and Joe Biden kept. If the Fed is pressured to bring interest rates back down too quickly – as Trump tried to do during his first term and is promising to do again, it can spring inflation loose once more.

It is weird. The nation’s economy so closely tracts its mood that you would think that those on the Right would be more excited. You would think that coming on the heels of a surprisingly “clear” victory – team MAGA would be laser-focused on building a “greater America again!” Instead, we hear more anger than joy, more about payback than plans moving forward to “do something” great. What about building ten million new homes? A new Civilian Conservation Corps? Something big? But the mood is less ebullient than dark, not so much optimistic as sinister. And even though very few of us are surprised, there is a temptation to want to shake team Red up and say “You worked so hard to get this, do something worthwhile and show us something great!” All the while worried that the only thing they seek is payback in the form of breaking, not building.

Maybe that is all they want. But they will most certainly pay a price. Trouble is, many of them seem all too willing to endure pain so long as they get to inflict even more. The cruelty was always the point. And hatred brought them together. If nothing else, they can always unite around uncommon hate for anything deemed “liberal.”

Hopefully things brighten. Some of us think it’s actually possible. But watch the bond rates and markets. People who move money professionally are pretty quick to pick up on changes in the country’s mood and those changes can come overnight, only to then take decades to reverse. It is far easier to break than build – and that’s the problem, especially with respect to an economy.

Economies are weird that way. This one remains the ticking time bomb hanging over the entire second term, starting with housing and expanding in scope from there. Ideally, optimism in the country and care for each other wins out over hate. If for no other reason, it is good for the economy.

God Bless: I can be reached at [email protected] and @JasonMiciak and on Blue Sky (Try it, it is a clean platform) 

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