As House Democrats dig deeper into their impeachment proceedings, some investors have become nervous about the potential impact of an impeachment on the economy, including the stock market and real estate. But, some real estate experts in our network don’t think it will have much of an impact. The inquiry is based on allegations by a whistleblower that President Trump abused his power as president when he asked the Ukrainian president to investigate his re-election rival, Joe Biden and son, Hunter.
It’s too soon to tell what this inquiry will dig up, if anything, or who it will implicate. And depending on how this plays out, the impacts could be massive or minor. There are plenty of opinions on what might happen if Trump were impeached, including the President himself.
Will Markets Soar or Sink?
Right before the formal inquiry was announced, Trump tweeted that the stock market would crash if he were removed from office. He boasted, “Do you think it was luck that got us to the best Stock Market and Economy in our history. It wasn’t!” He had made a similar claim last year in connection with a proposed inquiry into Russian election meddling. In that case, he tweeted, “If I ever got impeached, I think the market would crash. I think everybody would be very poor.”
Stocks were down somewhat after the inquiry was announced, but not by much. And then they rallied when Trump raised hopes about a trade deal with China. CNBC reports that some traders believe Trump tried to intentionally boost the markets with that comment, and maybe take the spotlight off the impeachment issue. (1)
CNBC contributor and CEO of Ritholtz Wealth Management, Josh Brown, doesn’t think impeachment will do much of anything to the markets. He tweeted that, “Presidents don’t deserve all the blame (or) credit they get for the economy (or) stock prices.”
Yahoo financial columnist, Rick Newman, takes that idea a step further. (2) He feels that “markets would soar, not crash, if Trump got impeached.” First of all, he says that impeachment of Trump would hand the presidency to Vice President Mike Pence, and not the Democrats.
With Pence at the helm, Newman points out, “The best of the Trump agenda — tax cuts and deregulation — would remain in place. But the worst of the Trump agenda — tariffs, protectionism, xenophobia, and political interference with the free market — would dissipate.” That, he says, could likely be a welcome relief for some investors.
How Will Impeachment Affect Real Estate?
Real estate may also escape the dark cloud of impeachment. Mansion Global wrote a piece called: “U.S. Real Estate Market Will Likely Stay the Course Despite Impeachment Inquiry.” (3) It cited Olshan Realty president, Donna Olshan, who says, “The real estate market is dependent on factors that have to do with the economy, consumer confidence and the stock market.” She says, “If any one of those things goes down for a sustained period, it will affect us, but right now stocks are up. Wall Street is finding this is a non-event.”
One of the things that can roil a market is investor uncertainty, but we’ve already had a lot of that over the last year, so it’s already something we’re dealing with. Real estate appraisal firm Miller Samuel’s CEO, Jonathan Miller, doesn’t believe impeachment will generate a significant amount of additional uncertainty.
Mansion Global also cited Redfin lead economist Taylor Marr who says an impeachment probably won’t change the real estate plans of people across the country. He says, “People are going to move based on life changes — having kids, marriage, retiring. Those are the drivers.”
Will Impeachment Derail Housing Finance Reform?
Another aspect of the housing market that’s closely connected to the Trump administration is a plan to privatize Fannie Mae and Freddie Mac. Treasury Secretary Steven Mnuchin recently unveiled the plan, and the latest news is that the Treasury Department has increased the amount of profit each entity is allowed to retain. Fannie Mae will be allowed to keep $25 billion while Freddie Mac will be able to keep $20 billion. That will help put them on a path toward independence.
If Vice President Pence took Trump’s place, not much would change with housing finance reform, according to HousingWire. (4) It points out that the head of the Federal Housing Finance Agency, Mark Calabria, is overseeing most of the Fannie-Freddie reforms, and before he had that job, he was Pence’s chief economist for two years. So the two men are apparently in sync.
Pence demonstrated his enthusiasm for Calabria when he was confirmed as Director of the FHFA with a tweet. He said he’s sure Calabria will “reform our housing finance system so homeownership is affordable & sustainable for American families.”
And then there’s the potential that the House will impeach President Trump but a Senate trial will not result in his removal from office. That’s what happened when House Republicans impeached Bill Clinton and Andrew Johnson. President Nixon also faced impeachment but resigned before it got to the Senate. We would return to the status quo with more headlines about some other issue, and the real estate market would likely continue to buzz along in the background.
My partner on our building projects said, “Just as nutrition is secondary to tastiness for a restaurant’s food menu, the news media often makes accuracy secondary to whatever it takes to get and keep our attention. A modest and straight forward headline noting the boring neutrality of the current state of the real estate market won’t get the same number of clicks as some doomsday prediction.”
He added, “For me, it comes down to the buy on a piece of land, not politics.” He says:
- We want to purchase it for below market value
- We like to purchase with all entitlements
- We complete all due diligence before spending money and time
- We analyze the financials without the use of leverage