Trump's 1 Million Homes Plan — Will It Fix Housing or Backfire?

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Video Summary

The housing market remains unaffordable, with median home prices experiencing a slight increase of 1.1% over the past year, contradicting predictions of a crash. The National Association of Realtors Housing Affordability Index hovers near 100, indicating a struggle for median-income families to afford median-priced homes, a stark contrast to the affordability seen before 2019. Proposed solutions include building 1 million "Trump homes" through a rent-to-own program, funded by private investors and potentially guaranteed by Fannie Mae and Freddie Mac. This initiative stems from President Trump's stated desire to keep home prices high, not lower them. The video posits that the Federal Reserve's money printing and subsequent inflation are the primary drivers of this affordability crisis. An interesting fact is that President Trump has directed Fannie Mae and Freddie Mac to buy $200 billion in mortgage bonds to lower interest rates, though the impact has been limited on the $12 trillion mortgage-backed security market.

Short Highlights

Home prices have not crashed and remain expensive, with a 1.1% increase in the median price over the last 12 months.
The National Association of Realtors Housing Affordability Index is near 100, meaning a median-income family can barely afford a median-priced home.
Before the pandemic, housing was significantly more affordable, with the index above 200 in 2013.
A proposal to build 1 million "Trump homes" involves a rent-to-own model with private investors.
The Federal Reserve's money printing and the resulting inflation are identified as the core causes of housing unaffordability.
President Trump has instructed Fannie Mae and Freddie Mac to purchase $200 billion in mortgage bonds to lower interest rates, though the impact is limited.

Key Details

Housing Market Status: No Crash, Persistent Unaffordability [00:00]

Homes remain expensive, and the housing market has not crashed as many predicted.
Median home prices have actually increased by 1.1% over the past 12 months.
Predictions of a housing market crash over the last five years have proven incorrect.

The crash callers were wrong.

Housing Affordability Index: A Struggling Metric [01:17]

The National Association of Realtors Housing Affordability Index is currently near the 100 level.
A reading of 100 signifies that a median-income family can afford a median-priced home.
Readings above 100 (like 160-170 in 2019-2020) indicate housing was comfortably affordable.
For much of the past four years, the index has dipped below 100, meaning median-income Americans could not afford a median-priced home.
Current readings barely above 100 are compared to a D-minus on an exam, indicating a bad situation.

We're right at the threshold near 100.

Historical Affordability and Pre-Pandemic Context [02:25]

Prior to 2019, housing affordability was much better.
The index was above 200 in 2013.
Housing was affordable leading up to the pandemic, benefiting those who bought homes before then.

The index was above 200 in 2013, and leading up to the pandemic, housing was affordable, but now it's not.

Proposed Solution: Building 1 Million "Trump Homes" [03:50]

President Trump aims to increase housing affordability by encouraging homebuilders to build more homes.
A proposal involves building 1 million "Trump homes" with private investors funding the construction.
The plan includes a rent-to-own model where monthly rental payments over 3 years would apply towards a down payment.
Investors are seeking mortgage guarantees from Fannie Mae and Freddie Mac for this program.

The Trump administration is now working with homebuilders, and the homebuilders are now submitting their proposals to President Trump.

The Root Cause: Federal Reserve and Inflation [05:15]

The primary reason for housing unaffordability is attributed to the Federal Reserve and its money printing.
Money printing disproportionately distributed wealth, increasing the wealth gap.
Financial asset inflation has negatively impacted median-income families.
The Federal Reserve, working with the federal government, is blamed for this situation.

It's the inflation. It's the financial asset inflation that screwed over the median income family in the United States of America.

President Trump's Stance on Home Prices [05:41]

President Trump wants to keep home prices high.
This stance is partly driven by political considerations: a housing crash would upset voters, leading Republicans to lose votes.
A recession, which could follow a housing crash, is something the US government cannot afford due to falling tax revenue, rising debt-to-GDP ratio, and potential trouble in bond markets.

President Trump said, and I quote, "I don't want to drive housing prices down. I want to drive housing prices up for people that own their homes."

Presidential Action: Mortgage Bond Purchases [07:17]

President Trump has already taken action by ordering Fannie Mae and Freddie Mac to buy $200 billion in mortgage bonds.
This directive aims to lower mortgage interest rates.
Buying mortgage bonds increases bond prices and decreases interest rates due to their inverse relationship.
While this action has helped, the $200 billion purchase is a small fraction of the $12 trillion mortgage-backed security market, limiting its significant impact.

Because of this, I am instructing my representatives to buy $200 billion in mortgage bonds.

Future Outlook and Investor Concerns [08:41]

It is uncertain which specific housing plan President Trump will ultimately favor.
Fannie Mae and Freddie Mac are expected to be involved, providing guarantees to protect investors.
There is a concern that many deals may be unfavorable for the American taxpayer.