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For many Americans, the dream of homeownership has become an elusive dream. relatively high mortgage rates Limited inventory makes housing unaffordable for many people.
President Donald Trump wants to fix the problem. president Sign executive order On Tuesday, the bill would ban Wall Street investors from buying single-family homes in an effort to free up inventory for individual homebuyers.
“Hard-working young families cannot effectively compete for new homes against Wall Street firms and their vast resources,” Order explain.
Additionally, the president suggested—but failed to implement— Purchase $200 billion in mortgage bonds reduce mortgage interest rateand allow 401(k) Withdrawal Make a down payment on a house.
The president’s effort appears to be a big win for prospective homebuyers, but experts say there are caveats.
Unstable foundation
With consumers facing a shortage of affordable housing, the theory is that a ban on institutional investors — large corporations that typically buy hundreds of thousands of homes each year — would free up inventory for ordinary people who want to buy homes.
However, institutional investors are not a big problem for them when it comes to investor-owned single-family homes, according to one agency. recent reports From real estate data and predictive intelligence company BatchData. They represent only 2% of the investor-owned single-family home market. Non-institutional investors (those with one to 10 investment properties) account for about 96% of the market, BatchData said.
“[The executive order] It’s going to make headlines,” said Ben Mizes, president of Clever Offers, a cash offer home comparison website. independent Via email. “However, the real impact on inventory is minimal. Institutional buyers only account for about 2% of investor-owned homes, so if they exit entirely, they won’t release a significant amount of inventory.”
Mizes said the increase in inventory from the institutional investor ban likely would not have a significant impact on national home prices and would have only a minimal impact on regional pricing.
“These companies typically buy in certain markets and in certain price categories,” Mizes said. “There may be localized impacts, such as a slight cooling in the rapidly expanding Sun Belt market. However, when looking at the country as a whole, it is more important to consider developing price trends: supply, price and demographics.”
Additionally, Alexei Morgado, owner of Lexawise, a real estate test preparation website, said renters may face difficulties due to the executive order.
“Renters are also likely to have a tougher time going forward, as large investors own a large portion of the rental stock, so if they divest, there may be fewer places to rent,” Morgado said in an email. The Independent. “This could drive up rents or limit choice.”
short-lived
Earlier this month, Trump announced that he might have his administration buy $200 billion in mortgage bonds, a move that would theoretically lower mortgage rates. But how deep will home loan rates fall, and how long will they last?
“It’s hard to say,” said Sarah DeFlorio, vice president of mortgage banking at William Raveis Mortgage. independent Via email. “At the very least, one hopes it will lower interest rates. But because it is artificial and policy-driven, it is unlikely to have a lasting impact without ongoing intervention.”
DeFlorio said that while the impact may not be long-lasting, buyers who purchase homes while interest rates are falling will definitely benefit.
“If you time it to buy when it happens, that may benefit you,” she said.
However, Dr. Jonathan Ernest, an assistant professor of economics at Case Western Reserve University, said a surge in home purchases caused by lower interest rates could drive up home prices because they tend to rise as demand increases.
“While this purchase may have a modest impact on mortgage rates, it may further increase demand for single-family homes without addressing the housing shortage on the supply side,” Ernest said. independent in an email.
Buy now…pay later
Earlier this month, Trump economic adviser Kevin Hassett told Fox News the administration’s plan Allow 401(k) withdrawals Help buyers with a down payment on a home.
Typically, withdrawals from a 401(k) before age 59 1/2 will generate a 10% Early withdrawal penaltyAccording to the IRS. Trump’s plan would likely waive penalties for people who want to withdraw 401(k) funds to pay for a mortgage down payment.
Is it worth taking a 401(k) withdrawal to realize the dream of homeownership? No, said Dr. Robert R. Johnson, a professor of finance at Creighton University and CEO of the Economic Index Association, an investment strategy firm. This can be done Putting retirees at risk Once they stop working, they don’t have enough money to live comfortably.
“The risk of taking out a loan from a 401(k) limits your options later in life,” Johnson told independent in an email. “Simply put, if a person does not have sufficient retirement savings, there are few good options. Once you reach retirement age but have not accumulated sufficient retirement savings, you are left with only two options – continue working or accept a lower standard of living in retirement – and neither of these options [is] OK “