The following discussion reviews the likely agenda with US President Trump’s tariffs and impact on investors and housing with overlay with Fed decisions and “missing middle” housing policies. Contributions by Dean Jones, President & CEO of Realogics Sotheby’s International Realty (“RSIR”), and Matthew Gardner, Principal of Gardner Economics, array 20 key observations that align the potential outcomes of such policies with RSIR’s strategic investments in delivering attainable housing solutions with House Bill 1110.
Summary of the Conversation and Findings:
1. Trump’s Tariff Strategy and Potential Economic Impacts
- Tariffs are aimed at protecting US industries, reducing trade deficits, and pressuring the Federal Reserve to lower interest
- Risks include a global economic slowdown, higher deficits, and possible recession, all of which are influencing investor
2. Residential Real Estate as a Safe Harbor and Inflation Hedge
- Real estate becomes attractive during economic uncertainty due to its relative stability and potential for value
- Fixed-rate mortgages, rising rents, and inflation protection increase demand for residential properties, especially in highly sought-after areas like Seattle-Bellevue.
3. Federal Reserve and Mortgage Rates
- Lower interest rates, if achieved through pressure on the Fed, would increase affordability and drive investor and first-time buyer activity.
- However, risks could arise that include the possibility of an asset bubble starting to inflate given intensified competition in some markets.
4. House Bill 1110 and Housing Market Alignment
- The bill enables middle housing (duplexes, triplexes, and other denser product types) inside single-family zoned areas to address pervasive housing shortfall and affordability
- Effective implementation could convert renters to owners, especially if paired with financing incentives and government support during the current period of economic uncertainty.
5. Localized Real Estate Dynamics in Seattle-Bellevue
- High housing costs, tech-driven demographics, and restrictive zoning have led to a high renter population poised to become
- HB 1110, if coupled with lower mortgage rates, could catalyze entry-level homeownership and reshape the market, (despite challenges like construction costs and zoning resistance) – RSIR and Realtie are uniquely positioned to lead the wave of development from “dirt to door.”
1. Trump’s Strategy with Tariffs
Trump is using tariffs primarily as a tool:
- To protect US industries (especially manufacturing and steel industries);
- To pressure trading partners, particularly China, to negotiate more favorable trade deals;
- To reduce the trade deficit, which he viewed as a sign the US was being taken advantage of; & ultimately
- To pay down the national debt and allow for the extension of his 2017 tax cuts.
However, tariffs are taxes on imports, which:
- Increase costs for US businesses and prices for consumers;
- Can lead to retaliatory tariffs from other countries; &
- Disrupt supply
2. Impact on the Economy and Recession Risk
As tariffs raise costs and add significant levels of uncertainty from market participants, it is likely that:
- Businesses will look to cut capex (investment) due to uncertainty with respect to their businesses;
- Consumers will experience lowering purchasing power in the face of higher prices; &
- Trade tensions will weigh significantly on overall confidence and global growth.
This mix can slow the economy, potentially leading to, or deepening, an economic contraction or period of recession.
3. Pressuring the Federal Reserve
Trump publicly criticized the Federal Reserve for keeping interest rates too high during his presidency, especially while trade tensions and tariffs were potentially slowing growth.
Why? Because lower rates would:
- Make borrowing cheaper (therefore stimulating investment and spending);
- Weaken the US dollar (which lowers export costs to other nations); &
- Would offset the drag caused by tariffs and trade
So, Trump’s goal was to:
- Create leverage via tariffs;
- Force a Fed response to the economic slowdown; &
- Spur growth through easing of monetary policy (even if his own trade policy caused the slowdown in the first place).
4. Effect on the US National Debt
Several factors link all this to the deficit:
- Increased revenue from tariffs bolsters the federal balance sheet;
- However, recession or economic slowdowns lower tax revenues from corporations and households;
- Increased government spending to fight an economic slowdown driven by trade wars with other nations = greater federal outflows; &
- Although lower interest rates do reduce the cost of debt, the Federal debt level rises if spending exceeds income.
Bottom line: While tariffs may bring in money short term, the economic drag they cause — combined with any stimulus or tax cuts and lower tax revenue during slowdowns — tends to widen the budget deficit.
Summary of the Strategy (and Risks):
- Tariffs = leverage + protectionism +
- Forcing the Fed to cut rates = cheaper money to offset tariff
- Hoped outcome: better trade deals, a recovery in the manufacturing sector, and an expanding economy.
- Risks: recession, higher deficits, market instability, trade wars, damage to global trade relations, and the potential for
5. Investor Flight to Safe Harbors
When economic uncertainty exists due to trade wars, global instability, or recession fears, investors look for:
- Stable, tangible assets such as residential real estate (as people always need housing); &
- As residential real estate is considered a “hard asset”, it tends to retain value during periods of market volatility or recessions.
Tariffs and geopolitical uncertainty, if they do trigger market volatility or recession worries, will likely:
- Increase demand for residential real estate among investors; &
- Shift more funds away from stocks or volatile currencies and into physical assets, such as housing.
6. Real Estate as an Inflation Hedge
If tariffs and supply chain disruptions fuel inflation (as they often do), real estate becomes even more attractive due to the fact that:
- Property values tend to rise with inflation;
- Rents go up, thus increasing cash flow for landlords; &
- Fixed-rate mortgages allow investors to have fixed costs, with the share of income dedicated to mortgage payments falling over time, as well as owning an appreciating asset.
It therefore stands to reason that, if inflation is high and rates are low (a unique but possible combo), investors will:
- Pile into real estate to preserve capital and generate income; &
- Prefer “buy-and-hold” strategies given strong rental
7. Impact of Fed Fund Policies and Potential for Lower Mortgage Interest Rates
If Trump’s pressure on the Fed succeeds in lowering interest rates:
- Borrowing becomes cheaper;
- Monthly payments drop, increasing affordability; &
- Investors can leverage more for less cost (higher ROI on financed properties).
This causes:
- Increased buying activity, especially in affordable and mid-tier markets;
- Price appreciation, as more buyers compete for limited inventory; &
- Potential asset bubbles, depending on if developers
8. Net Effect on Residential Real Estate (Investor View)
Here’s the likely scenario under Trump-era policies:
Bottom line for investors:
- Residential real estate becomes very attractive;
- Cash flow + appreciation + inflation hedge = a compelling combo; &
- If mortgage rates are low, and prices aren’t inflated yet, it’s a prime time to buy and hold.
Now let’s review some high-impact, localized considerations with recent policies announced and macro fundamentals noting that the Pacific Northwest is one of the leading economic drivers in the US.
The Seattle-Bellevue metro is a fascinating test case because it’s at the intersection of:
- High-income, tech-driven demand;
- Historically restrictive zoning;
- New pro-housing policies – such as House Bill 1110; &
- High cost of housing and exasperated sensitivities to national economic pressures like inflation, “higher for longer” mortgage interest rates, and investor behavior (much of regional wealth is tied to publicly traded stocks).
Let’s break down how this all potentially converges.
9. Quick Recap: What Is House Bill 1110?
House Bill 1110, passed in Washington State (2023), effectively:
- Upzones single-family neighborhoods statewide;
- Requires cities to allow duplexes, triplexes, and fourplexes in areas previously zoned for single-family homes (depending on the size of their population):
- Aims to increase housing supply and ease affordability
In the Seattle-Bellevue area (the region’s most populated sub-market):
- This is a huge change, especially for the Eastside (Bellevue, Redmond, Kirkland), where zoning has long favored single-family homes and NIMBY resistance is high.
10. Combined Impact: National vs. Local Factors
National Factors (Trump-era style policy impact):
- If inflation persists, and the Fed is pressured to lower rates, investors return to real estate;
- With real estate seen as a hedge and borrowing cheaper, investor interest rises, even in high-cost markets; &
- If the economy softens or tips into a mild recession, you get a “flight to quality,” where high-demand metros (like Seattle) attract capital because they’re still growing and stable.
Local Factors (HB 1110 & housing goals):
- Zoning reform opens up infill development in high-demand areas like North Seattle, West Bellevue, and around transit corridors;
- More small-scale multifamily = more inventory potential; but
- Would-be sellers must be motivated to offer their land to builders; &
- Delivery will take time — permitting, infrastructure, local pushback, and construction costs will delay actual supply growth.
11. What This Means for Real Estate Investors in Seattle- Bellevue
Short to Medium Term (1-3 years):
- Investor demand remains strong, especially with any decline in interest rates;
- HB 1110 doesn’t flood the market with housing, so prices likely remain high due to an ongoing demand/supply imbalance;
- Developers and investors may begin land assembly or value-add plays — e.g., buying single-family homes to redevelop as triplexes/fourplexes; &
- Multifamily lots increase in value, especially near
Longer Term (5-10 years):
- If HB 1110 delivers significant new supply, it could:
- Stabilize or slow price growth;
- Off competition to alternative condominium high-rise products; &
- Create more competition in the rental market; but will likely
- Favor well-located, well-designed units over generic
However:
- Construction costs in the Puget Sound are high; &
- Community resistance and permitting delays may limit how much new housing actually materializes.
12. What to Watch as an Investor
Bottom line:
Seattle-Bellevue real estate remains a strategic, long-term play — especially if you’re betting on:
- Policy-driven supply expansion (slow);
- High-income demand (steady); &
- Macro trends driving capital into
But why do Seattle and Bellevue have so many renters and how will the potential for lower mortgage rates and introduction of new housing options with House Bill 1110 impact housing trends?
Several factors contribute to this phenomenon:
13. High Housing Costs
- Both cities have high median home prices (often well above what middle-income earners can afford); &
- This pushes many residents, especially younger professionals and families, into long-term renting.
14. Tech-Driven Demographics
- The Seattle-Bellevue metro is a major tech hub (Amazon, Microsoft, );
- Highly mobile workforces—many employees relocate temporarily for jobs and prefer renting over buying; &
- Some tech workers delay homeownership due to volatility in stock-based compensation.
15. Limited Housing Supply
- Zoning restrictions and NIMBY resistance have historically limited multi-family and dense housing construction; &
- This results in low housing stock and high competition, again driving up prices and limiting ownership options.
16. Lifestyle and Urban Preferences
- Young professionals and smaller households often choose to rent near downtowns, prioritizing walkability and transit over ownership;
- Bellevue has seen a luxury rental boom, attracting high-income renters who don’t want to buy.
17. House Bill 1110 Aligns with Economic Shifts
House Bill 1110 Summary:
This Washington State law allows for middle housing—like duplexes, triplexes, and fourplexes—to be built in areas traditionally zoned for single-family homes. It aims to:
- Increase housing supply;
- Diversify housing options; &
- Promote affordability and ownership
18. Mortgage Rates Drop While Recession Fears Rise
Positive Effects on HB 1110 Goals:
- Lower mortgage rates could increase the feasibility of entry-level homeownership, especially in newly permitted middle housing units;
- Builders and developers may find it easier to finance projects aligned with HB 1110; &
- First-time buyers, priced out during high-rate environments, may now afford newly built or converted homes.
Challenges to Watch For:
- Recession fears might:
- Discourage private investment in new housing despite zoning flexibility;
- Lead to layoffs or wage stagnation—especially in tech-heavy regions—therefore reducing buyer confidence; &
- Developers may hold off on projects if demand looks uncertain or if material costs remain high.
19. The Key Balance
If HB 1110 is to succeed in converting renters to owners in cities like Seattle and Bellevue:
- Zoning reform must be matched with financing access, such as first-time buyer assistance and incentives;
- State and local governments may need to support construction during economic uncertainty (e.g., subsidies, tax breaks, resisting unsustainable premiums like Mandatory Housing Affordability programs that add cost to developers, etc.);
- Community engagement and infrastructure planning will be crucial to prevent backlash or gentrification; &
- Local homebuilders will need to scale significantly to play their role in delivering a high volume of new housing at attractive price points to compete with rental alternatives.
20. Realogics Sotheby’s International Realty (“RSIR”) & Realtie Aligned for HB 1110 Opportunity
- Exclusive licensing agreement signed provides distinct advantages to identify land and play matchmaker with homebuilders;
- Long-term relationships with local homebuilders provide access to product design, development proformas, and vertical construction;
- Existing RSIR infrastructure with hundreds of licensed brokers and robust experience in local markets provides a scalable solution for property representation on both sides of the transaction;
- Recent alignment with Tom Skepetaris and Rebecca Mitsui (King
County’s most active listing brokers since 2020), engages matchless experience and capabilities for builders to manage the land development process from “dirt to door”; &
- In-house creative and advertising agency CLAY provides efficient marketing solutions for high-volume of micro-housing communities.