What will a President Trump mean for SoCal housing and L.A.’s building boom?

With home prices and rents rising in Southern California, developers are busy building houses, condos and apartments – particularly in downtown Los Angeles, where a residential building boom is underway.

So what does an unexpected Trump presidency mean for the housing market, which has continued to show strength eight years after the housing bubble popped and the financial crisis wiped out millions of homeowners?

The answer has a lot to do with which Donald Trump inhabits the Oval Office.

Will it be the businessman who’s spent much of his life as a developer, or the conservative populist who has promoted trade and other policies that some economists fear would lead to a recession. Or maybe he’ll be a bit of both.

Home buyers might be saddled with higher mortgage rates at a time they are already struggling to afford a home. But builders could also be emboldened if regulatory hurdles are reduced, allowing them to build more in a region with a persistent housing shortage, experts said.

Major cities across the country, particularly Los Angeles, are experiencing a building boom in their downtown areas — a construction wave that has primarily been focused on rental housing.

It’s been driven by an improving economy in those cities, low interest rates and the declining rate of home ownership. In downtown Los Angeles, there are more than 6,000 apartments under construction.

To the extent Trump’s policies help economic growth, the commercial real estate market will benefit, even if interest rates rise, said Stuart Gabriel, director of UCLA’s Ziman Center for Real Estate.

But much will depend on what policies Trump pursues, following a campaign in which the president-elect called for mass deportations and raising tariffs on China, but also on repealing key financial regulations and spending perhaps $1 trillion on rebuilding the nation’s infrastructure.

“Had Clinton been elected, I had a pretty good sense of the type of policies on the agenda, which was more or less status quo. Now with Trump, I don’t know what he is going to do,” said Christopher Thornberg, founding partner of Beacon Economics.

“Does he focus on trade wars and throwing out 10 million people? Or is he going to focus on infrastructure and deregulation of the financial system? Those have entirely different economic outcomes.”

The president does not have as much influence over building regulations, which developers say stifle new housing projects, as do state and local lawmakers. But that doesn’t mean he couldn’t have an impact.

Experts say Trump and the Republican-controlled Congress could implement tax breaks for home builders, give states incentive to limit regulations or encourage lending to builders and consumers.

In an August speech to the National Assn. of Home Builders, Trump said that 25% of the cost of a home is due to regulation.

“I think we should get that down to about 2%,” he said, according to a press release from the association.

But even before the election and the talk of easing the regulatory burden, real estate observers were starting to question how long the current construction boom in cities, including Los Angeles, could last given the pace of development.

“Some of those markets may be coming close to overbuilt,” Gabriel said. “So we expect more judicious review [of new projects by developers] going forward.”

Another factor that could slow home sales, of course, would be if mortgage rates rise, as they have since Trump was elected earlier this week. That has been due to fears that his promised cuts in taxes and new infrastructure spending could lead to large deficits.

But Ralph McLaughlin, chief economist of Trulia, said there are other factors at play that could temper forces pushing interest rates up.

Global uncertainty typically prompts international buyers to buy U.S. bonds, which pushes down mortgage rates and makes borrowing cheaper – though with some foreign markets concerned about Trump, some investors might leave the U.S. bond market.

“The U.S. economy now looks less safe because we don’t know Trump’s policies toward trade,” McLaughlin said.

Then there is the psychological factor.

McLaughlin said that in places that voted for Hillary Clinton in large numbers, such as Los Angeles County, unsettled home shoppers might have temporary reservations on making what is typically the biggest purchase in a person’s life.

“There may be this short-term anxiety that may cause some households and investors to restrict their expenditures,” he said. “But, we think that is a perception-driven event and not anything based on fundamental economic policies that Trump may implement — primarily because we don’t know what those are going to be yet.”

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