Why Trump's housing market initiatives won't help much in the long run

• Krimmel argues Trump's initiatives are 'short run' fixes that won't solve structural supply issues; demand-side policies risk inflating prices further without increased construction
• The fragmented US housing market requires local solutions like zoning reforms and builder incentives, as federal policies can't address divergent regional dynamics from Northeast to South
• Potential Fed rate cuts to 5.5% from current 6.2% could unlock inventory by reducing the 'lock-in effect,' but cheaper financing may reignite price growth and undermine affordability gains

Summary

President Trump has announced housing market initiatives aimed at increasing affordability, including a ban on institutional investors purchasing homes and urging Fannie Mae and Freddie Mac to buy billions in mortgage-backed securities. However, senior Realtor economist Jake Krimmel told CNBC these measures will likely provide only short-term relief rather than addressing fundamental structural issues.

Key Limitations:

Krimmel argues the policies focus on stimulating demand without tackling the core housing supply shortage. Demand-side interventions risk inflating prices further, potentially leaving first-time buyers no better off long-term. The economist emphasized the need for "long-run supply side solutions" rather than demand stimulation alone.

Market Fragmentation Challenge:

The U.S. housing market isn't uniform—regional disparities make federal policies ineffective as blanket solutions. The Northeast and Midwest face tight inventory and construction constraints, while the South and West struggle with affordability despite active building. Krimmel stressed that local governments must implement tailored measures like zoning reforms, builder incentives, and affordable housing subsidies.

Interest Rate Impact:

Trump has pressured the Federal Reserve for rate cuts. Current mortgage rates hover around 6.2%, and a drop to 5.5% could push first-time buyers into the market and unlock inventory by reducing the "lock-in effect" on existing homeowners. However, lower rates could also reignite price growth, potentially offsetting affordability gains.

Bottom Line:

While Trump's housing policies may provide temporary market stimulus, lasting affordability requires comprehensive supply-side reforms and locally-focused initiatives. Federal demand-side measures alone cannot resolve the complex, regionally-diverse housing crisis.