Donald Trump’s victory in the election surprised investors as they quickly re-evaluated the possible economic effects of a presidential candidate who promised tax cuts, jobs growth, regulatory reform and massive spending on infrastructure.

Fannie Mae, one of the government’s major mortgage finance companies, says it's too early to tell how home sales will be affected by Trump, who made his fortune in real-estate development. Its senior economists forecast that home sales will slow in 2017 from last year mostly because the Federal Reserve will keep raising the cost of borrowing.

“We’ve had significant discussion on the nature of policy change and the sequence of how it will happen,” Douglas Duncan, chief economist at Fannie Mae, said in an interview with Newsmax Finance. “We’re looking at tax cuts, de-regulation, trade policy and the 100 ways that policy change can flow or re-set.”

Home sales growth will slow to about 1.5 percent to 2 percent this year, or half of the 2016 level, as the economy chugs along with a 2 percent expansion, according to Fannie Mae’s estimates. Better income growth is needed to drive stronger sales, Duncan said.

Fed policymakers last month forecast that they'll approve three rate increases in 2017 as inflation picks up and joblessness hovers below 5 percent, possibly indicating the economy has reached full employment. They predict the Fed funds rate will rise from 0.5 percent now to 1.4 percent by the end of the year, and to 1.9 percent by the end of 2018.

The Fed's target rate affects the yield on the U.S. 10-year Treasury note and how lenders set mortgage rates based on a prospective borrower's credit rating.

Bubble Sequel?

While regions of the U.S. like San Francisco have seen a double-digit jump in home prices in the past year, Fannie Mae sees less risk of a housing bubble similar to the one that peaked in 2006. The bursting of that bubble led to the 2008 financial crisis and the worst economic contraction since the Great Depression.

Today’s housing market doesn’t have the same level of easy credit and speculative over-building that ended up being so devastating to the economy 10 years ago, Duncan said. Limitations on the supply of homes are helping to drive up prices in several regions, some of which have strict rules on approving new construction.

One encouraging longer-term trend is the entrance of millennials into the housing market as first-time buyers, said Mark Palim, deputy chief economist at Fannie Mae, in an interview.

“We’re seeing a pick-up in the 25-year to 34-year age group of buyers,” Palim said, pointing to Fannie Mae's survey data that show an improvement in sentiment toward home-buying.

The millennial generation born from 1980 to 2000, which has been characterized by record numbers of adults living with their parents, is gradually migrating into renting and home-buying as they age, get jobs and start families.

The homeownership rate, which last year reached an all-time low of 62.9 percent in data going back to 1965, rebounded slightly to 63.5 percent in the third quarter. That level is roughly in line with the two-thirds of people who own homes in developed markets, Duncan said.