President Trump said in a speech in Davos, Switzerlandthat he would improve home ownership in the US by pushing down mortgage rates, restricting institutional investors from hoarding real estate and reducing credit card costs.
Speaking at the World Economic Forum on Wednesday, Mr. Trump described home ownership as “a sign of life and strength,” as he proposed his executive order this week aimed at preventing Wall Street firms from competing with Americans for housing.
However, he stopped short of providing details on how the ban would work, and housing experts say the measures fail to address some of the key drivers of rising housing prices.
“It’s just not fair”
In his speech at the annual meeting of world leaders, policy makers and business figures, Mr. Trump accused institutional investors of driving up housing prices for Americans by buying hundreds of thousands of properties for investment purposes.
“Homes are built for people, not for companies,” said Mr. “You’re just not good in society. They can’t buy a house.”
His proposed ban would limit future purchases of single-family homes by large real estate investors, such as hedge funds and real estate investment trusts, but would not force them to sell existing properties. The plan will need to be approved by Congress before it can go into effect.
But Jina Yoon, chief investment strategist at LPL Financial, noted that the proposal applies only to existing homes and does not include newly built homes, which may allow some firms to continue to stockpile properties.
“This allows institutional investors to shift their capital to construction-to-rental projects, potentially accelerating the development of a rental community owned and operated by large institutional investors,” he said in an email. “And there are many structural factors that drive housing prices and affordability problems than the share of housing owned by institutional investors, such as chronic inventory shortages, zoning constraints, income and housing costs.”
Across the US, large investors make up about 1% of the total single-family home market, according to an August study by researchers at the American Enterprise Institute, a nonpartisan think tank. Yet research from the Government Accountability Office shows that even low levels of institutional investment in local housing markets can boost home prices, especially in communities with many 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 housing affordability fail to address the housing market’s difficulties.
“Given how big this issue is across the country, it deserves more attention and consideration than has been provided,” he told CBS News.
Specifically, Roller emphasized the shortage of available housing for sale, saying that new US tariffs on imported home building materials have driven up costs and that the Trump administration’s immigration crackdown has caused labor shortages at construction companies.
Mortgage rates are falling
Mr. Trump on Wednesday said his policies to reduce housing prices are already bearing fruit, pointing to mortgage rates this month. dropped to three years low after he ordered the federal government to buy $200 billion worth of mortgage securities.
The President also said that he may take other measures to reduce the cost of mortgages, but added that he does not plan to do so because he wants to protect the existing home owners.
“If I really want to break down the housing market, I can do it quickly so that people can buy houses,” he said.
The recent drop in mortgage rates to just over 6% has spurred more homebuying and refinance activity, according to Freddie Mac.
Analysts at Morgan Stanley estimate that the government’s purchase of $200 billion in mortgage securities will lower mortgage rates by 0.15%.
“While any decline in mortgage rates is helpful for purchasing, the independent impact of this move on our numbers is small,” the investment bank’s analysts said in a report.
Lower mortgage rates also risk pushing up home prices as more buyers enter the market, according to real estate experts.
Credit card interest rate
President Trump said another administration plan to help struggling Americans regain their financial strength – a credit card 10% interest for one year – will also improve housing availability.
“This will help millions of Americans save their homes,” said Mr. Trump, who said rising credit card debt is preventing many Americans from saving a little money.
The banking industry opposes this, saying it will limit consumers’ access to credit and lead them to risky lending products.
