“If he is elected, we will increase our Fed funds by about 50 basis points,” Ryan told me, referring to the interest rate at which banks and other institutions lend money to each other.

We’re just under a week away from the presidential election and the housing scene is still at a standstill. The two candidates have plans, or drafts of plans, for housing. But inflation plays a key role. It can cause prices to rise, even though real estate serves as a hedge against it. The consumer price index rose only 2.4% in September from a year earlier, which is very close to the Fed’s target. Not to mention that the same month the central bank entered an austerity cycle, cutting its key interest rate by 50 basis points. So you might think that the worst is behind us, but that may not be the case.

In June, 16 Nobel Prize-winning economists signed a letter expressing concern that Trump’s proposals could reignite inflation. Earlier this month, 68% of economists were surveyed by the Wall Street Journal said inflation would likely be higher under a Trump presidency. On the other hand, 12% said the same for a Kamala Harris presidency. Hot, hot inflation is what got us into this mess, the frozen housing landscape. Home prices had already soared during the pandemic, but when inflation hit a four-decade high, prompting the Fed to aggressively raise rates, mortgage rates followed indirectly: the housing market was paralyzed.

If Harris were to win, the most likely scenario would be that the Senate would turn Republican; If that happens, “it’s the status quo of policy,” said Mark Zandi, chief economist at Moody’s Fortune. “Nothing meaningful will change in terms of tax policy, spending policy and regulatory policy. So inflation will be the same in that status quo as it is now, consistent with the Fed’s target.”

But if Trump were to win and serve another four years, it would likely be a Republican victory in the House of Representatives and the Senate, Zandi said. That means Trump will get his tax cuts, which Zandi said will be financed largely through budget deficits. In the event it’s not a sweep, Trump could still go ahead with his tariff or immigration proposals due to an executive order. “Inflation will very likely be higher under Trump, under any scenario regarding the composition of the government,” Zandi explained.

Ryan echoed Zandi; Trump’s proposed policies are inflationary, again especially when it comes to tariffs, immigration and tax cuts, he said Fortune. For example, Trump has imposed a 60% tariff on all Chinese imports and a universal 10% tariff on imports from all countries. And mass deportation of undocumented immigrants is virtually the only option available in his immigration policy, which takes away the labor supply, Ryan said. “That’s why there’s a lot of talk about his second potential presidency being inflationary,” he explained. Still, Trump’s policies could be watered down depending on how Congress looks.

Regardless, the two economists agree that consumer prices would be higher under Trump. That suggests the Fed’s first step would be to stop cutting rates. Zandi thinks the central bank will immediately pause rate cuts if Trump wins, just to see what happens. It is possible that the Fed will raise rates again if necessary, but it is more likely that the Fed will hold off on raising rates for a while longer.

But because nothing would change if Harris were elected, the economy you have today is, according to economists’ expectations, the economy you will have a year from now,” Zandi said. According to Ryan, Harris’ “proposed policies are not nearly as inflationary,” but she has also mentioned deficit-financed spending. Yet he does not see a Harris presidency prompting the Fed to change course.

That’s not to say everything would be perfect if Harris were president; That won’t be the case, and housing will still be quite stuck, maybe there will be a small recovery. Mortgage interest rates could also drop slightly. However, expectations of a new Trump presidency are already taking hold, and could only get worse if he is elected.

Mortgage rates fell in anticipation of the Fed’s first and only rate cut to date. That is no longer the case. They’re back: the last daily value for the average interest rate over 30 years was 7.09%. Part of it has to do with the “Trump trade,” Zandi said, “the expectation that he will win, and that this will lead to higher inflation and bigger budget deficits.” This is already having an impact on mortgage interest rates.”

Ryan also mentioned the “Trump trade.” As bets on him rise, so do 10-year Treasuries, and that’s what affects mortgage rates. It’s not entirely clear whether the surge will continue if Trump actually wins, as some of that is already priced in at this point – although it could happen. Not to mention that the market will also be looking at the composition of Congress, and that could lead to some swings.

The higher the mortgage interest rate becomes, or the longer the mortgage interest rate is higher, the more closed the housing market will be. Not many people are selling because who wants to give up their lower rate for a much higher rate, not to mention the prices are higher too? That, plus an existing housing shortage, has made it nearly impossible to buy a home for yourself. A higher mortgage interest rate, or even an unchanged interest rate, will not help. Unfortunately, if you missed the short-lived period before the Fed’s rate cut, you may not want to jump into the situation anytime soon. Any recovery we see in the housing world over the next two years “would be a little more superficial under a Trump presidency,” Ryan explained.

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