Trump Wants Lower Mortgage Rates, Not Cheaper Houses

Core Insights - President Trump's proposals aim to make housing more affordable by focusing on lowering mortgage rates without significantly impacting home prices [1][9] - The administration's strategy raises questions among economists about whether reducing borrowing costs alone can effectively address housing affordability issues [2][9] Economic Impact - Housing affordability is crucial for families to purchase homes, build wealth, and feel financially secure, influencing broader economic growth through consumer spending [3] - Protecting existing homeowners' wealth may support consumer spending but could maintain high prices as a barrier for new buyers [3] Policy Focus - Trump's housing policies have primarily targeted mortgage rates, including instructing Fannie Mae and Freddie Mac to purchase $200 billion in mortgage bonds to lower borrowing costs [6] - The introduction of longer 50-year mortgages is also proposed to provide more options for homebuyers [6] Supply and Demand Dynamics - An increase in housing supply could lower home prices, but current low inventory levels may counteract affordability gains from lower mortgage rates [7] - Trump's executive order to limit large institutional investor purchases aims to increase housing supply, though it may only affect a small portion of the market [12][14] Wealth Effect - Higher home values contribute to consumer spending, with the "wealth effect" indicating that increased housing wealth can lead to greater consumer expenditure [10] - Consumer spending has remained strong, with a reported increase of 0.3% in both October and November, supported by affluent consumers benefiting from wealth effects [11]