Why buying a home is getting harder in the US and what’s Trump’s $200bn plan to cut mortgage rates?

Against this backdrop, Trump said the government would buy USD 200 billion in mortgage bonds, a move he claimed would help bring down mortgage rates and reduce monthly payments for buyers.

What the housing research shows

A study by AD Mortgage found that cities such as Los Angeles, New York and several West Coast markets are among the least accessible places to buy a home.

In Los Angeles, where the typical home value is around USD 936,000, households would need more than 37 years to save for a down payment at an average savings rate. Even with higher savings, it could still take over two decades.

Similar challenges were seen in high-cost markets such as Hawaii, San Jose, San Francisco and New York, while some smaller cities like Bozeman, Montana, have also become less affordable as prices rose faster than local incomes.

The research highlights a widening gap between home prices and earnings across the country, with many households facing 15 to 20 years or more just to save for a deposit.

What Trump has proposed

In a post on social media, Trump said he was directing the government to buy USD 200 billion worth of mortgage bonds using cash held by Fannie Mae and Freddie Mac, the two mortgage companies under government control.

“This will drive mortgage rates down, monthly payments down, and make the cost of owning a home more affordable,” Trump wrote.

The White House did not immediately provide details on when or how the bond purchases would be carried out, the Associated Press (AP) reported.

How the plan would work

The Federal Reserve has previously bought mortgage-backed securities during economic crises to help lower interest rates. Such steps helped push mortgage rates below 3 per cent during the pandemic, leading many homeowners to refinance.

Mortgage rates are currently averaging around 6.2 per cent, according to Freddie Mac, and have not fallen below 6 per cent since September 2022.

Economists say government purchases of mortgage bonds could bring rates down slightly but would not fix deeper problems in the housing market.

“At a high level I feel this is putting a Band-Aid on a deeper issue,” said Daryl Fairweather, chief economist at Redfin.

She estimated that the move could lower 30-year mortgage rates by about 0.25 to 0.5 percentage points, but said it would not solve the shortage of homes for sale.

Why affordability remains a problem

Home prices have continued to rise faster than incomes due to years of underbuilding, a trend that began after the 2008 financial crisis.

Lower mortgage rates could increase demand, economists warn, without increasing supply, which may push prices higher again.

There are also concerns that using Fannie Mae and Freddie Mac’s cash reserves could leave them more exposed if the housing market weakens in the future.

Meanwhile, the Federal Reserve still holds around USD 2 trillion in mortgage-backed securities, down from its pandemic peak, as it gradually reduces its balance sheet.

Trump has said he plans to announce broader housing reforms and has also suggested blocking large investors from buying homes, as voters continue to express concern over the cost of housing ahead of November’s midterm elections.