President Trump said in a speech in Davos, Switzerland, that he will promote homeownership in the U.S. by pushing for lower mortgage rates, restricting institutional investors from hoarding residential real estate and capping credit card costs.
Speaking at the World Economic Forum on Wednesday, Mr. Trump described homeownership as “a symbol of health and vigor,” while touting his executive order this week aimed at deterring Wall Street firms from competing with Americans for homes.
Yet he stopped short of providing details of how such a ban would work, and housing experts said such measures fail to address some of the key drivers behind rising home prices.
“It’s just not fair”
In his speech at the annual gathering of world leaders, policymakers and business figures, Mr. Trump blamed institutional investors for driving up home prices for Americans by purchasing hundreds of thousands of properties for investment purposes.
“Homes are built for people, not for corporations,” Mr. Trump said. “It’s just not fair to the public. They are not able to buy a house.”
His proposed ban would restrict future purchases of single-family homes by major housing investors, such as hedge funds and real estate investment trusts, but would not force them to sell properties they already own. The plan would require approval by Congress before taking effect.
But Jina Yoon, chief alternative investment strategist at LPL Financial, noted that the proposal only applies to existing houses and excludes newly built homes, potentially allowing some firms to continue scooping up properties.
“This allows institutional investors to shift their capital to build-to-rent projects, which could actually accelerate more rental community development owned and managed by large institutional investors,” she said in an email. “And there are many more structural factors that drive home prices and affordability issues than the share of homes owned by institutional investors, such as chronic supply shortages, zoning constraints, income and mortgage costs.”
Across the U.S., big investors account for roughly 1% of total single-family housing stock, according to an August analysis by researchers at the American Enterprise Institute, a nonpartisan think tank. Yet research from the Government Accountability Office shows that even modest levels of institutional investment in the local housing markets can drive up home prices, especially in communities with high concentrations of investor-owned properties.
Shamus Roller, executive director of the nonprofit National Housing Law Project, said the plans released so far by the Trump administration to address home affordability fail to account for the complexities of the housing market.
“Given how big an issue this is across the country, it deserves more attention and thought than what has been provided,” he told CBS News.
Specifically, Roller highlighted the shortage of available homes for sale, saying that new U.S. tariffs on imported homebuilding materials have raised costs and that the Trump administration’s crackdown on immigration has led to worker shortages among construction companies.
Falling mortgage rates
Mr. Trump on Wednesday said his policies for easing home prices are already bearing fruit, pointing to mortgage rates this month falling to a three-year low after he directed the federal government to buy $200 billion worth of mortgage securities.
The president also said he could take other steps to reduce the cost of home loans, but added that he doesn’t plan to do so because he wants to protect existing homeowners.
“If I wanted to really crush the housing market, I could do that so fast people would buy houses,” he said.
The recent drop in mortgage rates to just over 6% has spurred more home buying and refinancing activity, according to Freddie Mac.
Morgan Stanley analysts estimate that the government buying $200 billion in mortgage securities would drive home loan costs down by 0.15%.
“While any decline in mortgage rates is helpful for affordability, the standalone impact of this move on our numbers is small,” analysts with the investment bank said in a report.
A dip in mortgage rates also risks pushing up home prices as more buyers enter the market, according to housing experts.
Credit card interest rate cap
President Trump said another administration plan for help struggling Americans regain their financial footing — capping credit card interest rates at 10% for one year — would also boost housing affordability.
“This will help millions of Americans save for a home,” said Mr. Trump, who has said that surging credit card debt impedes many Americans in saving for a down payment.
The banking industry has opposed the cap, saying it would limit consumers’ access to credit and steer them toward riskier lending products.