The U.S. housing market has been a pressure cooker for years, with prices soaring and inventory scarce. Now, a new dynamic is emerging: mortgage rates are falling, yet home prices remain stubbornly high, creating fierce competition among buyers. President Trump’s latest housing agenda may worsen this trend, potentially driving up costs for those trying to enter the market.
The Risk of Artificially Low Rates
Currently, the average 30-year fixed mortgage rate is near 6%, a significant drop driven by President Trump’s push for Fannie Mae and Freddie Mac to purchase up to $200 billion in mortgage bonds. The goal is to keep borrowing costs low, which increases buyers’ purchasing power by lowering monthly payments. However, experts warn that this strategy could backfire in a market already constrained by low supply.
Increasing demand without addressing the fundamental shortage of homes is likely to push prices higher. Even small decreases in mortgage rates can trigger price hikes in such conditions, making homeownership less accessible, not more. First-time buyers may find themselves paying more for a property, even as their financing costs decline.
Restricting Investors: Another Layer of Complexity
President Trump has also proposed limiting large investors’ ability to buy single-family homes, aiming to make housing more affordable for families. The idea is to redirect properties away from corporations and back into the hands of individual buyers.
However, real estate experts remain skeptical. Without increasing housing supply, these demand-side interventions are unlikely to lower prices and may instead intensify competition for the limited number of starter homes available. Reuters reports that the plan may simply make the market more challenging for first-time buyers.
The Bottom Line
For those looking to buy their first home, the current situation presents a paradox: lower mortgage rates are offset by higher prices and intense competition. Affordability isn’t just about financing; it’s about a complex interplay of politics, policy, supply constraints, and market dynamics. Trump’s plan may simplify home purchasing, but it may just make it more complicated.
