Donald Trump, America’s first property-developer president, helped lift the housing market out of its recent slump. All it took was chaotic tweeting, and an unpredictable trade war that’s put investors on edge.

“Perhaps the only beneficiary of President Trump’s trade war is housing, at least for the time being,” said Mark Zandi, chief economist at Moody’s Analytics. “The war has undermined the economy and pushed down mortgage rates.”

Trump has thrown conventional housing wisdom out the door. When the economy is strong, as it is now, rates typically rise and investors leave the relative safety of Treasuries and mortgage bonds.

One of the surprises of the Trump era is that chaos has been the best medicine for housing, at least in the short run. The trade war with China has slowed global economies, and borrowing costs have plunged, even with U.S. unemployment at the lowest in 50 years.

Mortgage rates remain near historic lows. The 30-year fixed rate dropped to 3.49% last month, the lowest level in almost three years, and a full percentage point lower than a year earlier. That drop boosted sales by 117,000, about 35% more than would be expected, based on a CoreLogic Inc. analysis of data starting in 1971. Last September, after a 0.8% rise in rates, sales plunged by 173,000.

What might seem like small changes to mortgage rates are having bigger consequences than they have in the past because today’s buyers are struggling with affordability.

Mending Market

The global economic uncertainty fueled by trade disputes has helped the housing market mend. Contracts to purchase previously owned homes in September posted the largest annual increase in four years, the National Association of Realtors reported this week. And the homeownership rate in the third quarter rose for the first time this year, as renters flooded back into the purchase market.

Trump, a real estate tycoon, knows the power of low rates. He has harangued the Federal Reserve -- first criticizing it for hiking too much, and more recently for failing to cut more aggressively. The Fed cut rates for the third time in 2019 on Wednesday.

Even as housing picks up steam, mortgage rates have started to creep up in recent weeks. The average for a 30-year fixed loan climbed to 3.78% this week, the highest since July, Freddie Mac data show. Zandi expects rates to climb above 4% this year if Trump and China strike a deal, which could be enough to extinguish the fledgling market rebound.

Chinese officials are casting doubts about reaching a comprehensive long-term trade deal with the U.S. even as the two sides get close to signing a “phase one” agreement, Bloomberg reported on Thursday.

“Housing’s on a razor’s edge,” Zandi said. “If mortgage rates rise even modestly, the housing market will go from rip roaring to a deep freeze.”

“Over in Europe and Japan they have NEGATIVE RATES. They get paid to borrow money. Don’t we have to follow our competitors?” @Varneyco Yes we do. The Fed doesn’t have a clue! We have unlimited potential, only held back by the Federal Reserve. But we are winning anyway!

— Donald J. Trump (@realDonaldTrump) October 29, 2019

Economic Turmoil

While the drop in interest rates has helped homebuyers in the short term, there’s an argument that those benefits are secondary to the larger economic turmoil bubbling up around the globe. Gross domestic product in the third quarter grew at a 1.9% annual rate, the lowest since the end of 2018, Commerce Department data showed Wednesday.

“I don’t look at this is as being great for the customer,” said Eric DeBello, owner of CHM Mortgage Group in Marshfield, Massachusetts. “From a macro standpoint, this stuff isn’t good.”

It’s also tricky for investors who are deciding how much to allocate to mortgage bonds. Uncertainty can’t be easily measured in financial models and algorithms, said Scott Buchta, head of fixed income strategy at Brean Capital.

“Before, unpredictability used to be whether unemployment was going to be bad or good -- now it’s a tweet,” Buchta said. “For investors, that’s dangerous because they get whipsawed by things.”