Former President Donald Trump has announced a directive for the federal government to purchase $200 billion in mortgage bonds. This strategic move aims to significantly lower mortgage rates and alleviate the financial strain of homeownership for many Americans. The announcement, made via social media on March 14, 2024, comes as the White House grapples with rising voter concerns regarding housing affordability ahead of the upcoming midterm elections.
The funding for this substantial purchase is expected to be sourced from Fannie Mae and Freddie Mac, the two mortgage companies currently under government conservatorship. Both entities reportedly hold approximately $200 billion in cash reserves, which Trump claims will be utilized to facilitate this initiative. He emphasized that the program “will drive Mortgage Rates DOWN, monthly payments DOWN, and make the cost of owning a home more affordable.”
Addressing Housing Affordability Concerns
The issue of housing affordability, characterized by home prices that have consistently outpaced income growth, has long been a pressing concern in the United States. The persistent shortage of new construction has particularly impacted first-time buyers and those looking to upgrade their homes. As housing costs continue to rise, the pressure on the administration to find effective solutions intensifies.
White House officials did not provide immediate insights regarding the timeline for the proposed purchases. Historically, the Federal Reserve has engaged in buying mortgage bonds during economic downturns to help reduce interest rates. Currently, the Fed holds roughly $2 trillion in mortgage-backed securities, a decrease from $2.7 trillion in June 2022, when inflation reached a four-decade high and mortgage rates surged.
The average rate for a 30-year fixed mortgage was reported at about 6.2 percent on March 14, down from nearly 7 percent when Trump first took office. Lower interest rates can provide relief by making monthly payments more manageable, although the effects may be temporary as home prices often adjust in response to rate changes.
As of the middle of last year, outstanding mortgage debt stood at approximately $21.1 trillion, according to the St. Louis Federal Reserve. Many homeowners capitalized on lower rates during the pandemic, refinancing their mortgages at rates of 3 percent or lower, which further underscores the ongoing impact of interest rate fluctuations on the housing market.
Future Housing Reforms and Institutional Investment
In a previous statement last month, Trump indicated his intention to introduce housing reforms aimed at improving affordability. He has also expressed a desire to restrict institutional investors from purchasing residential properties, a move that could have significant implications for the housing market. As discussions around these reforms continue, the administration’s commitment to addressing the housing crisis remains a critical focus in the lead-up to the midterm elections.
With the housing market in a delicate position, the outcomes of Trump’s proposed measures will likely be closely monitored by both political analysts and potential homebuyers. The administration’s approach to these challenges could play a pivotal role in shaping public perception and influencing voter sentiment as the elections approach.
