Samantha Delouya of CNN reports that President-elect Donald Trump will attempt to end Fannie Mae’s and Freddie Mac’s conservatorship. These government-sponsored enterprises (GSEs) guarantee 70% of U.S. mortgages, raising concerns about potential disruptions to the housing market. Economists warn that privatization could increase borrowing costs for Americans, with estimates suggesting an added $1,800 to $2,800 annually for a typical mortgage holder in today’s market. Critics argue that such a move may deter investors and disproportionately impact lower-income borrowers, who currently benefit from government backstopping

Candyd Mendoza of MPA reports on the issue, noting that privatization could disrupt the mortgage market by removing government guarantees, raising borrowing costs, and impacting lower-income families. With mortgage rates near 7% and affordability already strained, experts question whether the potential transition is worth the risk.

That said, Shaina Mishkin of Barron’s (subscription required) reports that Fannie Mae and Freddie Mac shares surged following Donald Trump’s election win, as investors anticipate renewed efforts to privatize the mortgage giants. 

Source: Yahoo! News (December 2024)

Mishkin reports that supporters argue privatization could unlock significant shareholder value, streamline operations, and foster innovation within the housing finance market. Proponents like billionaire investor Bill Ackman believe these reforms could transform the companies, ensuring long-term sustainability while reducing government involvement.

David Hollerith of Yahoo! News reports that proponents argue that re-privatization could generate billions for taxpayers and reduce the federal deficit. Wall Street heavyweights like Bill Ackman and John Paulson see the move as a transformative opportunity, with Mark Calabria, former FHFA director, estimating a 70% chance of completion by 2027. Privatization could unlock significant shareholder value while reshaping the U.S. housing finance system, according to Hollerith.

Gail Kalinoski of Multi-Housing News reports on the topic: “One major issue is that the GSEs are still undercapitalized. The combined capitalization of Fannie and Freddie is just short of $150 billion, and the capitalization required to exit is in the $300 billion range…Congress would likely need to modify the GSEs’ charters, allowing them to fund themselves, and also change the regulatory framework.”

Commercial real estate

A new report from Fact.MR finds that The global commercial real estate market is projected to grow 7.6%, reaching $9.48 trillion by 2034, driven by the adoption of hybrid work models and demand for flexible office spaces. North America leads the market, fueled by rising needs for digital infrastructure and mixed-use developments in cities like New York and Toronto. Developers increasingly prioritize smart building technologies and eco-friendly designs to meet evolving workplace demands, 

Amy Wolff Sorter of Connect CRE reports on a survey showing optimism for commercial capital raising in early 2025, with 81% expressing a positive outlook despite challenges like high interest rates. While private equity remains a key funding source, reliance on alternatives such as REITs and crowdfunding is growing. Notably, 68% of respondents reported higher returns from residential investments, driven by persistent housing shortages and rental demand. The survey underscores the resilience of smaller operators and the growing appeal of diversified funding strategies, which are expected to persist even as interest rates potentially decline.

Salvador Rodriguez of CNBC reports on the return-to-office trend, highlighting that San Francisco’s market is seeing renewed activity as AI startups and Gen Z professionals. Startups are capitalizing on low rents and high vacancy rates to secure flexible office spaces, fostering collaboration and innovation. The trend aligns with AI’s tech resurgence with in-person work gaining traction, particularly among younger workers eager for office culture. 

Liz Wolf of Nareit reports on optimism in the commercial real estate industry, highlighting the expectations for lower interest rates and improved financing in 2025. Retail and industrial remain strong, multifamily faces minor oversupply, and office struggles with demand for premium properties. Key factors like job growth and interest rates will shape progress as supply-demand imbalances correct.

Gabrielle Fonrouge, also of CNBC, reports that developers are transforming struggling malls into mixed-use spaces by adding apartments. At least 192 malls have planned housing projects since 2022, with dozens already completed or underway in states like California, Florida, and Texas. These conversions replace dying department stores with housing, retail, and green spaces, revitalizing malls while bringing residents closer to amenities.

Construction update

Teiruma Gonzalez of Realtor.com reports we are set for a construction boom, with 1.1 million new homes expected in 2025—a 13.8% increase from 2024. Builders will focus on smaller, more affordable options for first-time buyers. Builders are adopting technologies like modular and 3D-printed homes to cut costs and speed up construction. However, potential policy shifts, including tariffs and immigration changes, could raise labor and material costs, impacting affordability and growth.

Skylar Olsen of Zillow concurs, reporting that the 2025 housing market will see a construction boom with multifamily developments hitting 50-year highs, easing rental prices and boosting inventory. Smaller, more affordable homes are trending as buyers seek sustainability and cost-effectiveness. This increased supply is expected to improve affordability and negotiation power for buyers, particularly in the Southwest, while mortgage rate fluctuations will continue to shape the market.

The National Association of Home Builders (NAHB) Chairman Carl Harris comments on the current sentiment among the construction industry:

“With the elections now in the rearview mirror, builders are expressing increasing confidence that Republicans gaining all the levers of power in Washington will result in significant regulatory relief for the industry that will lead to the construction of more homes and apartments…“This is reflected in a huge jump in builder sales expectations over the next six months.”

That said, Robert Dietz of NAHB reports that construction job openings fell to 249,000 in October, down from 413,000 a year ago. This reflects a slowdown in parts of the residential construction industry amid tighter Federal Reserve policies. While the broader labor market remains soft, easing credit conditions may help stabilize demand for construction labor in the coming months.

Source: NAHB (December 2024)

Daryl Fairweather of Redfin reports that the recent election saw voters approve significant funding for affordable housing, with cities like Charlotte, Baltimore, and states like Rhode Island committing millions to new construction. While these investments aim to ease the housing crisis, regulatory barriers like zoning and red tape remain major challenges. Policies that cut costs and accelerate building are crucial for maximizing the impact of these funds and effectively addressing the housing shortage.

Finally, a Fannie Mae expert panel reports that home price growth is expected to slow to 3.8% in 2025 and 3.6% in 2026, reflecting deceleration due to high mortgage rates, rising inventory, and slower wage growth. These experts predict continued weak home sales and only modest declines in mortgage rates, with affordability challenges persisting beyond 2025.