President-elect Donald Trump has promised to lower prices for Americans, but his economic policies may not help one embattled part of the economy: the housing market. 

Mortgage rates continue to hover near a 20-year high, while house hunters face near record high home prices. The Federal Reserve’s two rate cuts, in September and November, haven’t trickled through to mortgages, which instead have climbed during the past month and are again hovering close to 7%. 

That’s because mortgage rates are based on several factors beyond the Fed’s benchmark rate, including the strength of the U.S. economy and changes in the yield for the U.S. 10-year Treasury bond. The latter surged after Trump’s November 5 electoral victory on concerns that his policies, including stiff tariffs on U.S. imports, big tax cuts for individuals and businesses, and a crackdown on undocumented immigrants could drive up inflation.

A key question for housing

Housing affordability is viewed as a top problem within the U.S. by Democrats, Republicans and Independents alike, according to a May poll from the Bipartisan Policy Center. The difficulty of affording a home, as well as the impact of rising rents, are issues that colored how voters viewed the economy leading into the election, with the high cost of living top of mind for many. 

“Going forward, the key question is: Are some of the Trump proposals inflationary or non-inflationary?” Lawrence Yun, chief economist at the National Association of Realtors, told CBS MoneyWatch. “One alarming part is tariffs — that means imported products will be more expensive, and it could take time for domestic production to ramp up.”

Trump on Monday pledged to put a 25% tariff on all products from Mexico and Canada, along with a 10% levy on Chinese goods. Those costs could boost the U.S. inflation rate by almost 1 percentage point, according to a new Goldman Sachs estimate. Higher inflation in turn could lead the Fed to slow or even pause its rate cuts – another blow to Americans hoping for lower borrowing costs.

Where will mortgage rates go in 2025?

To be sure, forecasting mortgage rates is difficult, given the number of factors that influence them. Yet based on Trump’s stated economic plans, Yun said he thinks the average 30-year fixed mortgage rate will bounce around between 6% and 7% for the next year, and could stick around 6.5% for much of 2025. 

But, he added, there’s a risk mortgage rates could inch even higher if Trump’s policies prove more inflationary than expected. Higher mortgage rates can add hundreds of dollars in monthly costs for borrowers.

Another issue is whether Trump’s policies could widen the federal deficit, which impacts borrowing as well as the yield on the 10-year Treasury. The nonpartisan Committee for a Responsible Federal Budget forecasts that Trump’s proposals would increase the federal budget deficit by $7.75 trillion over the next decade.

To pay interest on that debt, the government would likely have to issue more bonds, like 10-year Treasurys. That could lead investors to demand higher yields, or the return they receive for investing in the bonds. As those yields rise, that would push mortgage rates higher.

“In the first Trump presidency, the average mortgage rate was about 4% to 5%,” Yun said, adding, “We won’t get back to that 4% to 5% of that first Trump presidency.” 

Will housing become more affordable? 

Most Americans report that housing in their communities has become less affordable during the past year, a trend they don’t see improving, the Bipartisan Policy Center found. 

The median sale price of U.S. homes has dropped slightly during the past year, dipping to about $420,000 in the third quarter from $435,000 a year earlier, according to the Federal Reserve Bank of St. Louis. But that’s also considerably higher than the median sale price of $329,000 at the start of 2020, just prior to the pandemic.

The double whammy of high home costs and mortgage rates is pricing many buyers out of the market. The share of first-time home buyers dropped to 24% in 2024, the lowest since 1981, when the National Association of Realtors started tracking the metric. Prior to 2008, the share of first-time buyers had historically been 40%.

That’s a problem for would-be homebuyers — as well as the nation’s overall economic health — because homeownership is a key to building personal wealth. People who delay buying a home have fewer years to grow their assets, which can in turn crimp their ability to build a nest egg for their later years. 

The difference in wealth between homeowners and renters is stark: Homeowners had a median net worth of $396,200 in 2022, compared with $10,400 for renters and other non-homeowners, according to the Federal Reserve’s Survey of Consumer Finances. 

While mortgage rates might not see much relief in 2025, home prices are likely to remain stable, Yun predicted.

“The American way is to buy a home,” he said. “Maybe it’s a little smaller, or not perfectly ideal, but then trade up to the next home — in terms of buying rather than delaying, the data shows that homeowners build wealth, while renters are spinning their wheels.”

contributed to this report.

Americans may be shelling out more for gasoline if the incoming Trump administration follows through on threats to impose tariffs on imports from Canada and Mexico.

President-elect Donald Trump this week said he would enact a 25% tariff on all products from both countries, citing concerns about illegal immigration and illicit drugs flowing into the U.S. While prices could climb on a variety of goods shipped to the U.S., the potential impact on motorists and on the transportation sector could be particularly acute, analysts say.   

“Canada and Mexico are huge U.S. trading partners, so it’s a shot across the bow of longtime U.S. allies,” Patrick De Haan, head of petroleum analysis at GasBuddy, told CBS MoneyWatch.

“For a lot of the U.S., it could be problematic for what they pay at the pump,” De Haan said of the tariffs’ impact, in particular to inland regions such as the Great Lakes, Midwest and the Rockies. “The coastal areas have more options — they don’t rely as much on Canadian crude.”

Although the U.S. is the world’s leading oil producer, we still import a lot of crude, with Canada providing roughly 20% of the oil used stateside. As a result, gas prices could shoot up 30 to 40 cents a gallon, and potentially up to 70 cents, within as little as two days after the tariffs take effect, De Haan said.

 The national average for a gallon of regular on Wednesday stood at $3.07, down from $3.25 a year ago, according to AAA.  

The threatened tariffs on imports from Mexico and Canada could also result in a $3,000 increase in the cost of the average car, according to Wolfe Research analysts cited by the Wall Street Journal. Roughly $97 billion in auto parts are imported to the U.S. from the two nations annually, and 4 million vehicles are shipped in — roughly 3 million from Mexico and 1 million from Canada, the firm estimated. 

To be sure, it remains uncertain if Trump will follow through on his trade threats. Some analysts think the president-elect is likely using the specter of tariffs as a way to wring concessions from other countries, noting that his administration will be eager to avoid setting off another round of inflation just as U.S. prices are growing at a normal level. 

“We would be surprised if [the tariffs] were ever actually implemented,” analysts with investment adviser Capital Economics wrote in a report, noting that the auto sectors in the Canada, Mexico and the U.S. are tightly interconnected.