Trump’s Executive Order on Single-Family Home Purchases
Brian Wesbury, the chief economist at First Trust Advisors LP, has shared his thoughts on whether inflation is under control and the Trump administration’s intention to allow 401(k) funds for home down payments.
Investors have cautioned that restricting Wall Street’s ability to purchase single-family homes, aimed at making housing more affordable, could inadvertently raise prices instead. On Tuesday, President Trump signed an executive order instructing federal regulators to guide the sale of homes to individuals and to prevent federal programs from aiding Wall Street in purchasing single-family homes. The order emphasizes antitrust scrutiny over institutional home buyers and urges Congress to solidify these changes through legislation.
This executive action is part of the administration’s effort to address public concerns about housing affordability. However, investors are worried that these restrictions might lead to unintended outcomes, potentially heightening demand without increasing supply, leading to even higher prices.
David Wagner, head of equities and portfolio manager at Aptus Capital Advisors, remarked, “Housing affordability isn’t just a demand issue; there’s ample demand. The problem lies with supply.” He believes that such policies could create more demand, thereby boosting asset prices further.
New Measures Against Wall Street Home Purchases
The Trump administration aims to roll out policies designed to lower construction expenses, but it faces challenges since most housing regulations are held at local government levels. Michael Rosen, chief investment officer at Angeles Investments, pointed out that increasing demand without a corresponding rise in supply will inevitably lead to higher prices. He mentioned, “The ideal solution would be to simplify the process of building new housing units, a task made hard at the federal level since these regulations are generally local.”
Trump’s Plan and Rising Home Prices
Home prices in the U.S. have surged by roughly 75% since 2016—far exceeding the overall consumer price increases tracked by the consumer price index (CPI). However, the pace of price growth has slowed recently, with only a 1.7% increase noted in October year-over-year—the smallest growth rate in the past decade.
The National Association of Realtors has observed a gradual improvement in housing supply over the last year, which has contributed to moderating price increases.
Interest Rates and Housing Sector Challenges
Jim Tobin, CEO of the National Association of Home Builders, shared that their association is collaborating with governments to promote policies aimed at reducing building costs, with corporate investment playing a crucial role in this initiative. He believes corporate investment is the key driver for new home construction.
Post-2008 financial crisis, Wall Street firms like Blackstone and American Homes4Rent have acquired thousands of homes, and by mid-2022, these companies held about 3% of all single-family rental homes, based on government data.
These firms assert that their actions have contributed to inflating home prices, with Blackstone noting they’ve been net sellers of homes over the past decade.
