Donald Trump is about to unveil a pretty big and brazen plan. This plan would allow Americans to tap into their retirement savings for down payments on homes. We hope that this initiative will help address the systemic housing affordability crisis that continues to be the number one issue across the country among registered voters. Trump’s announcement comes as part of a broader strategy to alleviate voter anxiety ahead of the midterm elections later this year.
The announcement of the former President’s “final plan” is due next week. He’ll be taking it to the next Davos World Economic Forum. This plan includes directives for Fannie Mae and Freddie Mac, government-backed housing finance firms, to purchase $200 billion worth of mortgage bonds. This action is expected to help stabilize the housing market and eventually bring down mortgage rates for homebuyers.
A recent turn of events has seen the average rate on a 30-year mortgage fall below 6%. It’s the first time that has occurred in almost three years. Trump attributes this decrease to the measures outlined in his forthcoming plan, stating, “that’s not with the help of the Fed.” His comments suggest he wants to see his version of monetary policy stand apart from the common characterization of a monetary policy run by the Federal Reserve.
President Trump’s chief economic advisor, Kevin Hassett, has been one of the initiative’s most outspoken proponents, offering glimpses of its transformative potential. He proposes allowing Americans to use 10% of their home equity as an asset in their 401(k) accounts. This proposal would allow less wealthy people to stretch their retirement dollars farther as they buy their first home, while growing their investment.
“Suppose that you put 10% down on a home, and then you take 10% of the equity of the home and put it in as an asset in your 401(k). Then your 401(k) will grow over time.” – Kevin Hassett
Hassett pointed to the very rosy market reactions immediately after Trump made his announcement. “We’ve seen a pretty big reaction to the announcement, and I think that actually makes us all feel better, because the truth is that fewer people are buying homes right now than we’ve seen pretty much in my lifetime,” he stated.
Beyond these steps, Trump wants to order big institutional players out of the housing market altogether by banning them from buying up single-family homes. Greening vacant buildings This action aims to put more greening-enhanced properties within reach of individual purchasers. In doing so, it helps to ensure that housing remains affordable for working families.
Trump’s plan has mostly been lauded by industry watchers though some have questioned whether it’s enough to make a meaningful impact on rising housing costs. Proponents counter that the initiative would provide new, lasting relief. It could miss the mark by not addressing root causes on both the supply side and the demand side.
No surprise that this proposal has been seen the last few years. It has received new focus due to the state of the economy and the upcoming mid-term elections. With soaring cost of living and homeownership, voters feel the pressure. These are the issues that Trump’s plan would seek to provide real solutions to address once and for all.
LoanDepot’s head economist, Jeff DerGurahian, has commented on the implications of Trump’s housing plan. His perspective seems to be one of cautious optimism with respect to how these changes will redirect consumer behavior and address the real estate market’s supply and demand imbalance.
