Donald Trump has announced a significant initiative aimed at addressing housing affordability by directing the federal government to purchase $200 billion in mortgage bonds. This move, revealed on social media on March 14, 2024, is designed to lower mortgage rates and alleviate the financial burden of homeownership for many Americans. The announcement comes as the White House responds to rising voter concerns about housing costs ahead of the upcoming midterm elections.
The funding for this substantial purchase is anticipated to derive from Fannie Mae and Freddie Mac, the government-sponsored enterprises currently under conservatorship. These entities reportedly possess $200 billion in cash reserves, which could be utilized to facilitate the bond purchases. Trump emphasized that this initiative “will drive Mortgage Rates DOWN, monthly payments DOWN, and make the cost of owning a home more affordable.”
Challenges in Housing Affordability
Housing affordability remains a pressing issue, particularly as home prices have outstripped income growth amid a persistent construction shortage. This challenge has been a focal point since Trump’s initial term in office, complicating matters for first-time buyers and existing homeowners seeking to upgrade their living situations.
White House officials have not yet provided details regarding the timeline for funding these purchases. Historically, the Federal Reserve has engaged in the purchase of mortgage bonds during economic downturns to help lower interest rates. Currently, the Fed holds approximately $2 trillion in mortgage-backed securities, a reduction from $2.7 trillion in June 2022, when inflation reached a four-decade high and mortgage rates surged.
As of March 14, 2024, the average rate for a 30-year fixed-rate mortgage stood at around 6.2 percent, down from nearly 7 percent when Trump initially took office. Lower interest rates can facilitate cheaper monthly debt servicing, improving affordability temporarily until home prices adjust in response to changing rates.
According to the St. Louis Federal Reserve, there was approximately $21.1 trillion in outstanding mortgage debt as of mid-2023. Many homeowners capitalized on low interest rates during the pandemic, refinancing their mortgages at rates of 3 percent or lower.
Future Housing Reforms
In recent statements, Trump indicated plans to unveil additional housing reforms. He also expressed a desire to restrict institutional investors from purchasing residential properties, a move that could further influence the housing market dynamics.
The announcement of this $200 billion mortgage bond purchase signals a proactive approach to addressing housing affordability, showcasing the administration’s commitment to easing the financial pressures faced by homeowners and potential buyers. As the midterm elections approach, the focus on housing issues may play a crucial role in shaping voter sentiment across the nation.
