White House Housing Plans Risk Inflating Prices, Ignoring Core Supply Shortage

While renters desire falling home prices to enter the market, current owners benefit from high values, creating a policy dilemma. The Trump administration is exploring various solutions, including a 50-year mortgage, directing Fannie Mae and Freddie Mac to buy mortgage bonds to lower rates, banning Wall Street investors from single-family home purchases, and allowing 401(k) withdrawals for down payments.

However, the analysis suggests many of these proposals, like increased buying power, fail to address the underlying housing shortage and could inadvertently inflate prices further. For instance, a 4.5% mortgage rate without new supply could boost prices by 10% over three years.

Realtor.com identifies three paths to 2019 affordability: a 56% increase in median income to $132,000, mortgage rates dropping to 2.65%, or a 35% fall in home prices. Policymakers are reluctant to pursue measures that would devalue homes, given that 88 million U.S. households hold $34.4 trillion in housing equity.

Builders also resist oversupply, fearing price and profit dents. The article concludes that housing remains a "zero-sum game," with current White House proposals primarily aimed at voter appeal rather than fundamental market shifts.