Why the 2024 Election Changed Real Estate Forever
And what you need to know to survive 2025 real estate market
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When I look at the economy right now, there are three big signals flashing that could impact real estate investors, business owners, and anyone building wealth.
The 10-year Treasury and its impact on rates
The yield curve's warning signs
Tariffs and inflation
Let’s break ‘em down.
The 10-Year Treasury's Wild Ride
We’ve seen some dramatic moves in the 10-year Treasury yield recently. We dropped as low as 3.6% during summer 2024, but by November, we were back up around 4.3%. That's a massive swing in just a few months.
Why does this matter?
Because mortgage rates follow the 10-year Treasury. When we had lower Treasury yields, mortgage rates were in the low 6% range. Now? We're looking at 7%+ rates again.
In an already tight housing market, that ~75BPS rate increase makes buying even more challenging. For real estate investors and homebuyers, this means the math on deals just got tougher.
The Yield Curve's Warning Shot
The 2-year versus 10-year yield curve is an indicator that gets a lot of attention in finance circles, but is sometimes overlooked outside of them. When the yield curve inverts (meaning short-term rates are higher than long-term rates), it has historically signaled that a recession is coming.
Think about it — why would anyone accept a lower rate to lend money for 10 years versus 2 years? It doesn't make sense. You could get 4.2% on 2-year money versus 4.1% on 10-year money. This bizarre scenario typically happens right before economic trouble.
Recently, this yield curve has "uninverted" — moving from negative to positive. But we haven't felt a recession yet. Are we headed for the fabled "soft landing" everyone keeps talking about? The Fed is watching the data closely to decide their next moves.
The Trump Tariff Effect
The 10-year Treasury started climbing when Trump began pushing his tariff agenda. His stance is clear: He wants to shift manufacturing back to America instead of relying on imports from countries using low-wage labor.
The idea is that if Chinese goods get hit with 10-20% tariffs (or even 30% as mentioned), those cheap imports suddenly aren't so cheap anymore. This pushes companies to consider making products in America.
The upside? More American manufacturing jobs and higher wages. The downside? Higher prices in the short term since American labor costs more than overseas labor.
This ties into Trump's broader "Make America Great Again" strategy. By making imports more expensive through tariffs, he's trying to incentivize companies to bring production back home. While this could cause some short-term inflation as prices adjust, the goal is creating more high-paying American jobs over the long run.
Government Inefficiency: The Hidden Tax
One last point that ties all this together: Government inefficiency acts like a hidden tax on everything we do. From permitting delays to redundant departments, bureaucratic bloat drives up costs across the board.
Look at something as simple as renewing your car tags. We could probably handle the entire DMV through an app, but instead we maintain physical offices in every jurisdiction. This inefficiency gets priced into everything — and we all pay for it.
The Musk Model of Efficiency
Elon Musk's handling of X (previously Twitter) is interesting. He slashed the workforce, reportedly down to about 20% of its original size. Despite these cuts, the platform continues to operate and is regaining advertisers. Is this proof that other businesses can function just as effectively with leaner operations?
Musk's approach at X could be blueprint for government efficiency. This "reset and rebuild" strategy could be applied to government operations to reduce inefficiency and waste — as Musk is clearly trying to do.
The Regulation Burden: A Tale of Two States
The impact of regulation on costs and efficiency is most clear in the construction industry. California is a great example. Over the past 30 years, CA has added ~50% more regulations to their existing rules.
That means:
Permit processes can take up to two years
A simple backyard shed permit can cost around $15,000
Multiple inspections are required for even minor projects
Green milestones and building regulations add layers of complexity
The contrast between states is wild. Take Minnesota and North Dakota. While North Dakota has pretty light regulation, Minnesota’s path is closer to California's — extensive requirements and multiple approval layers. This regulatory red tape directly impacts housing costs and availability.
These increased regulations create what’s essentially another form of inflation. They drive up costs, slow down development, and make everything from housing to infrastructure more expensive. The effects are most visible in heavily regulated states like California, where housing costs have skyrocketed.
Bottom Line
Keep your eye on these signals, but don't get paralyzed by them. Times of change create opportunities for those who stay informed and nimble. The key is understanding how these macro forces affect your specific situation and adjusting accordingly.
Let me know in the comments: What other economic signals are you watching right now? How are you positioning yourself for 2024?
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