Trump's Bold Move to Shake Up Housing Market

President Donald Trump recently announced a bold plan to buy $200 billion in mortgage bonds, aiming to make homes more affordable. He shared this proposal on Truth Social, stating that Fannie Mae and Freddie Mac have substantial funds, making this an opportune time to act.

Key Details of the Plan

• Who will execute the purchase? The White House and the Federal Housing Finance Agency (FHFA) have not provided specifics.
• Timing: The announcement follows FHFA Director Bill Pulte's discussion of a potential IPO for Fannie and Freddie.

Trump's Criticism of the Biden Administration

Trump accused the Biden administration of ignoring the housing market, claiming he has already fixed many issues. He also noted that he did not sell Fannie Mae and Freddie Mac when he had the chance, believing this decision has increased their value significantly.

Will the Plan Work?

• The Federal Reserve has used similar strategies, known as quantitative easing.
• The Treasury has also purchased mortgage bonds, such as during the 2008 housing crisis.
• Mortgage rates typically follow long-term Treasury rates, not mortgage bond yields.
• After Trump's announcement, the 10-year Treasury yield dropped slightly, though this may not have a major impact.

Uncertainty Remains

The effectiveness of this plan is still unclear, as the executive branch cannot direct the Federal Reserve's actions.