Trump Just FLIPPED The US Mortgage Market

The biggest focus on the housing market from the mainstream media is always interest rates. If you look at any real estate story from any major news outlet, anytime they talk about housing and affordability, it always comes back to interest rates. And we have a lot to talk about today when it comes to the mortgage market, because the mortgage market just got completely flipped, guys. A couple of major things are going to be happening real soon. First of all, President Trump announced that there's going to be a mass injection of cash into the mortgage-backed security market, which impacts mortgage rates and housing affordability. Even though mortgage rates have been coming down, people are running away from this housing market in record numbers right now. In fact, the latest data shows us that fewer Americans continue to apply for mortgages even as mortgage rates slip. For the week ending January 2nd, mortgage applications fell 9.7% from just two weeks prior, which is a very steep drop, which means that there are fewer people out there right now trying to buy or refinance homes. That's a pretty big drop in just one week. And they say that purchase applications were up 10% compared to the same week one year ago, but were down over the week following decreases in conventional and FHA applications. And something else that we can see besides interest rates coming down on mortgages, actually home prices are coming down as well. And this is reflected in the average loan size. Right now, the average loan size is $408,700, which is the smallest that it has been in over a year. And this is across all types of loans, both conventional and government backed loans. And so what that tells us is that even though the prices are coming down, even though the interest rates on mortgages have been coming down, people are still walking away from buying right now. And the people who are buying are getting smaller mortgage amounts because they don't need to finance as much if the price comes down. And the other big key factor that we have to look at of what's going on with mortgages and mortgage applications right now is that according to the Mortgage Bankers Association, it's getting harder to secure a mortgage these days. And even if you're a qualified borrower, banks and lenders are pulling back as of December, offering fewer loan options and requiring further documentation in order to qualify. And let's face it, guys, if you've ever gotten a mortgage, it is not easy. Basically, the only thing it seems like they don't ask for is a blood sample. You know, they might as well keep a DNA sample on file for everybody. So that way you don't have to apply in the future. They already know everything about you because they ask for everything. And it is just unbelievable. You know, you get this huge request for all these documents. And then after you give them all of that, you get another huge request for documents because the first set of documents isn't thorough enough. So they need to review you even further, right? So the process of getting a mortgage is painstaking already. But according to Mortgage Bankers Association, it is getting even tougher now going into 2026. And that gives us a couple of different clues about the housing market. Because first of all, every time in the past when this has happened, when it gets really difficult to get a mortgage, that means that lenders are cracking down and only giving mortgages to the most well-qualified borrowers because they believe that the risk of default is going up. Meaning that a lot of people could be at risk of not paying their mortgage if they were to give out the loan. And a lot of this likely has to do with the current state of the economy. A lot of people have been losing jobs. It's very difficult to find a new job. Unemployment has been ticking up, even though it kind of just went down recently with the recent job reports. So there's a lot of problems when it comes to getting a loan right now. And the lenders don't want to be the ones holding the bag. They don't want to have defaults. And the other thing this shows us is that moving into 2026, even if prices continue to come down for real estate in general, and more inventory comes online, fewer buyers are going to be able to actually buy those homes, not only because of affordability, but just because lending standards is going to make it very difficult, if not impossible, for most buyers to be able to qualify, which is going to put further strain on home sellers that have been refusing to lower prices. According to the Mortgage Credit Availability Index, which measures how easy it is to get approved for a mortgage, that fell by 2.6% in December. And a decline means lenders are becoming more cautious, and credit availability is now at its lowest level in three months. And today I'm walking down Arch Creek Drive and a lot of the cross streets in Keystone Point, Miami. So what type of loans are the lenders pulling back on? Well, the riskiest ones that people have been taking advantage of. They're pulling back on doing adjustable rate mortgages. They're pulling back on the cash out refinances. And also requiring further documentation for people to be able to qualify. What are those two types of loans right there, guys? Those are the most volatile and risky type of loans. Because if you think about it, a cash out refinance is somebody who's pulling equity out of their home in a housing market where home values are likely dropping. It's not everywhere, but in many places they are dropping. And lenders don't like this because if the value of the home continues to go down, then that puts them in a more vulnerable position and also means that the homeowners getting these loans could potentially default. Same thing goes with adjustable rate mortgages. That's one of the main type of loans that got us in trouble back in 2008 and the reason why there were so many defaults, okay? And lately there's been a big uptick in the amount of buyers taking advantage of adjustable rate mortgages to get the lower rate today and betting on lower rates in the future. And everybody who took that bet over the past couple of years, that has backfired on them and people are stuck with higher rates and a situation where they can't refinance even though they were promised they would be able to by now. So one thing that the Trump administration is trying to do to counterbalance this and to counteract what's going on in the mortgage market is Trump just put out a social media post on Thursday and he was asking unnamed buyers, so that could mean the U.S. Treasury, Fannie Mae, Freddie Mac, or some other agency, we don't know, okay, to come in and buy $200 billion worth of mortgage bonds. And the reason for this is because it will bring down mortgage rates. That's something that Trump has wanted to do since he has taken office. He even keeps hammering Jerome Powell and the Fed to continue lowering interest rates there in hopes that it would make mortgage rates come down, even though that's not really how things work. But the point is that him and his administration really want mortgage rates to come down. He believes that that is the key to housing affordability, which clearly it is not, guys. We have talked about this so many times here on the channel, and I'm going to show you why this doesn't work here in a little while. Now, the reason for this push for all of these mortgage-backed securities to be purchased, $200 billion worth, is supposedly because Fannie Mae and Freddie Mac are sitting on a pile of cash right now that needs to be spent, and they're saying it needs to be spent on this. In response to this post online, you actually saw big corporations that are involved in real estate see their stock prices jump, guys. Rocket Mortgage, their stock price jumped more than 9%. United Wholesale Mortgage, their stock gained more than 13% in just one day. You had Better Home & Finance jumping 6% in one day. And even Opendoor, the company that everybody thought was going to be finished a few years ago, their stock jumped 13% in one day as well. So Wall Street's interpretation of what just happened here is that they are basically thinking this means the FHFA director, Bill Pulte, now is going to have to force Fannie Mae and Freddie Mac to buy $200 billion of their own mortgage-backed securities to bring down interest rates. Essentially, this is rigging the mortgage market. Already, the fact that mortgage-backed securities exist rigs the mortgage market and makes interest rates artificially low because lenders don't have to bear the full risk and responsibility when they underwrite these loans. Because shortly after these mortgages are made, many of them are sold to Fannie Mae and Freddie Mac, and now it is the government's problem, or in other words, your problem, the taxpayer, if people can't pay. And they're predicting that if this actually happens, which it probably will, then they expect the 10-year U.S. Treasury to finish 2026 at around 3.5%, which means that the 30-year mortgage rate could end 2026 at around 5.25%, which is still way too high. Most people are still not going to be able to afford today's prices, even if rates drop to that. So it will have a reduction effect on mortgage interest rates. But once again, guys, this is the focus on the wrong problem, right? Every single news outlet and government agency is focused on the wrong thing. And they're actually sitting here complaining that this actually isn't enough money. They need to actually buy more of these mortgage-backed securities. Like, this isn't enough. $200 billion is actually less than what some of these Wall Street firms were anticipating. So what's really going on here when we see things like this happening, okay? When you take a look at these actions, you have to look at who does this benefit, guys. And right away, you see the share prices of these companies jump, right? United Wholesale Mortgage, Rocket Mortgage, Open Door, all seeing major double-digit jumps in their stock price. And one day, just from a social media post about this, okay? So clearly, the shareholders of these companies, as well as the companies themselves, stand to benefit from something like this happening. Okay, who else benefits? Well, when the home prices go up, local governments and their taxing authorities definitely benefit because when prices go up, then they can charge you more in property taxes. Other sectors of the economy that also rely on housing get impacted. You have more transactions, which means more real estate agents, more title companies, more home inspectors get paid. A lot of these homeowners buy new appliances and furniture for their homes. They also hire contractors for renovations. That increases business on their end. And it also increases business to stores like Home Depot and Lowe's to buy different housing supplies. And those stores have been getting hit pretty hard lately with the sales slump. So all of these corporations and companies benefit. But what about the consumer? Do consumers benefit from this? Do potential homebuyers benefit from interest rates dropping like this and potentially seeing more home sales? Well, not really. First of all, we've already seen that as these interest rates continue to come down, everybody has been shocked by how low of a demand housing has seen, even with dropping interest rates. And that's mainly because the prices are still too high, even with falling interest rates. And with these rates coming down, it is just not enough to make housing affordable, guys. And it just goes to show you that the only lever that anyone is interested in pulling is the interest rate lever. Nobody cares about actually lowering home prices. Nobody cares about having people make substantially more money so they could just afford homes at today's prices. None of those things that actually would move the needle a lot further are ever discussed in any of these stories. It's always the focus on interest rates. And even if interest rates were lowered back down to where they were during the pandemic, let's say we go back to 2% interest rate, some kind of miracle happens, right? And it actually does open up housing affordability temporarily. Well, the reason it's temporary is because then it would create a surge of buyers onto the housing market and people would be buying once again. Then it would become a seller's market. Prices would rise once again. A few years later, we would be in a situation where home prices are unaffordable. But we've already moved interest rates down to record lows. What do you do next? You know, once you've pulled that lever far enough, what else can be done, guys? What can you do when mortgage rates are essentially zero? The answer is nothing. Just like every other government solution to these similar problems, it is temporary and it does not work in the long run. You know, they're already doing this with car loans. They're giving people seven and eight year car loans now to make the payments affordable. That can only work for so long. You can't just continue extending the financing terms indefinitely on everything and think this is going to fix all of our problems. Same thing goes with lowering interest rates. Let's say you're successful on lowering the rates. What happens when the rates have already been lowered and all the demand has been met and the prices have jumped to unaffordable levels even at low or zero percent rates? What then? So you see how this story goes. You know, if you just follow the current trajectory far enough down the path into the future, where this leads us is into an even bigger problem than what we have right now. And I have been calling for years for the government to just get out of the way, stop buying mortgage-backed securities, stop with all the housing incentive programs, the down payment programs, all of these things that make housing easier to buy and accessible to people who truly can't afford it. And that will naturally bring prices down, which brings affordability down faster than anything. Because the more the pool of buyers shrinks across the country, the less people are going to be buying and the less demand there's going to be for housing. And so anybody out there who wants to sell will be forced to sell at a lower price. But at this point, I am convinced that we are never going to see anything like this happen, maybe at least not anytime in our near future, because this directly counteracts all of the best interests of government, okay? As you can see by this recent move from the Trump administration, they want Fannie and Freddie buying mortgage-backed securities, okay? The local governments also have a vested interest in keeping home prices high and keeping them going up, because that means they can charge you more in property taxes. So the right thing to do is in direct opposition of what government wants. And that's why I think we're not going to see anything like this maybe ever happen, guys. If it does, it's only going to happen because it's really the last resort, right? It's going to be the only thing left to happen that might actually work. But I think we're still very far away from ever seeing something like that. And to just show you how big this focus on mortgage rates is, I saw another story today completely unrelated to this. But basically, the author of this story is talking about how it's not the interest rates that's hurting the housing market and affordability, it's all the rules when it comes to getting a loan. And by the way, the reason why it's so difficult to get a loan these days compared to 15 or 20 years ago is because of the Dodd-Frank Act that was adopted after the 2008 housing crash, because lending standards were far too loose back then. And it created a situation where millions of people bought a house that they just simply couldn't afford. But I would argue the same thing has actually already happened over the past three years. The only difference is the thing that's making it unaffordable now isn't the fact that buyers couldn't afford the payment when they bought the house. Now, the thing that's changed is property taxes and insurance has gotten so expensive that unexpectedly, they can no longer afford the house a few years later because of the massive jump in those expenses. So back when they passed Dodd-Frank, it raised compliance costs, it increased the legal risk for lenders, it reduced competition in mortgage lending, and it made small and first-time borrowers harder to serve. But the author of this story says that these rules should have been temporary due to the situation, and now it's time to revisit all of these things and loosen up lending in a sensible way, because ultimately, these higher borrowing costs and underwriting costs get passed along to the homebuyers, which increases mortgage rates about 70 or 80 basis points. According to the National Association of Home Builders, they estimate that local regulations add about $94,000 to the cost of a new home. And if you look at this chart right here, you can see going back to 2011, it was only about $55,000 or $60,000 to the cost of a new home. Now it's more like $95,000, which means that home prices for brand new homes have to be higher and people have higher payments. Okay, that part makes some sense. But going back to what I was saying about the banks and lenders tightening up credit, here's where this is showing up, okay? Mortgage debt is only about 44% of GDP right now, which is way below where it was before 2008. And this person is arguing that mortgage lending is becoming far too restrictive, and that's the problem. Now, one thing I agree with this person on is they do say that the demand side solutions always backfire. The things that they try to do, like the down payment assistance programs, this potential 50-year mortgage on the horizon, buyer subsidies, those are the down payment assistance programs and things I was just talking about that I think that they should get rid of. So this person agrees with me that that stuff doesn't work and inflates the cost of housing, but we need to make it easier for people to buy a house. And he says, listen, it doesn't mean have no rules, it means have smarter rules. He's calling for modernizing local planning and permitting, making building homes faster, and they can build more houses with less red tape. Although the biggest flaw in that is home builders have been building a record amount of homes lately, more than they have built in decades, and it's backfiring. You know, there's all these homes that are brand new sitting unsold right now. So clearly that's not the issue. And now buying a brand new home in 2026 is actually cheaper than buying a home on the resale market. So clearly it's not a supply problem. And even the resale market is back to pre-pandemic levels in about 80% of markets across the United States. But here's the thing, guys. This is just another fantasy that's probably never going to happen because it's probably more likely to happen than them just getting rid of all the down payment assistance programs and to stop buying mortgage-backed securities. But ultimately, it seems like the pendulum just swings in one direction too far each time something like this happens. You know, first it was too loose, leading to way too many people getting loans that couldn't afford them. Then it became too strict, leading to a situation where a lot of people just couldn't qualify to buy anymore. So this person argues it should be somewhere in the middle or more on a case-by-case basis. But as we've seen in the past, every time they deregulate something, it swings too far back in the other direction. And that's why you can already see these lenders are cracking down because these lenders know this. They see the mortgage delinquencies rising right now. They see delinquencies on auto loans and student loans rising as well. They understand the pressure on the average consumer right now. If they thought everything was great and it was going to be nothing but good times ahead, these lenders would be loosening up their lending. They would want to put more loans out there so they can make more money. After all, it is what they do for a living. So the fact that the lenders right now are saying, uh, I don't think so. We're going to pull back. It's starting to look too risky out there. Should be a huge warning sign for anybody who doesn't see this already. And I saw one other story today that I want to share with you guys. The headline was this. I can afford the mortgage, but not the maintenance. Do I buy the house? Well, already that kind of sounds like a stupid question, in my opinion. I just want to go over briefly why it is stupid. If you already know you're not going to be able to afford the maintenance and upkeep on the house, why would you buy it anyways? I don't know why somebody would even think to write into a news outlet and ask a question like this. I have no idea, but let's tear it apart a little bit here. First of all, when you buy a home on top of your mortgage payment, which is your taxes, your insurance, and all this stuff, okay, you are going to have extra costs on top of it. In fact, it is estimated that home buyers have an additional $18,000 to $25,000 in additional expenses per year on top of their mortgage payments, which is far greater than it ever used to be. And in some cases can even outweigh the actual mortgage payment itself. We're talking things like taxes and insurance, HOA fees, PMI payments, HVAC and plumbing repairs, roofing repairs, all of the big stuff. And if you're already one paycheck away from not being able to afford things or one major repair away from it, but the mortgage payment looks affordable, why on earth would you buy? Okay, you're basically already answering your own question. You're telling yourself that you don't have enough money. You're looking at your budget being realistic, and you know that you can't afford a big major expense or repair or anything like that, but still pondering if you should buy. And you see, those are the things I was talking about that lenders are starting to become aware of right now. They know that people are in this tight of a spot. And yeah, technically on taper, they might be able to qualify for the loan. But in reality, they know by looking at their finances, that things are so tight that they probably are going to be in trouble if anything were to go wrong. And they're starting to not give people these loans. Basically, guys, here's a quick rule of thumbs. You never have to ask a dumb question like this, okay? If you have six months of expenses saved after you pay for the sale of the home, meaning your down payment and closing costs, and your housing costs stay below 28% of your gross income, which I think is still too high, and you can absorb a major surprise expense, and you plan to stay in the home at least five years, this is the criteria you should be using to decide if you are ready to buy a home. And I would argue that even if you don't meet one of them, you're not ready. You really aren't. People drastically underestimate how expensive it is to be a homeowner these days. If you're buying instead and hoping and banking on a future raise at work, or hoping that you're going to be able to come into some inheritance money in order to pay for different things around the house, or hoping that nothing's going to go wrong. And if it does, well, I'll just take out another loan or something like that. You are definitely not ready. And that's why people have to stop looking at renting as a failure in life, because what it is right now is it's a strategy for getting ahead guys. Renting is 50 to 100% cheaper in almost every metro across the country. It allows people to build savings, build their investment portfolio faster. You can avoid panic if something goes wrong, because it's not your responsibility. And if you're somebody that decides to stretch things financially to get into a home, you are guaranteeing your future self that you are going to have troubles with money and potentially end up losing that house. Even if you don't lose the house, you are going to be basically working just to keep that house. And I don't understand why anybody would want to do that. So just keep all this stuff in mind that the news outlets, all the mainstream media, as well as our government, are fully aware of just how much of a slump this housing market is in. And they're basically trying to pull out all stops right now to try and increase buyer demand and restart everything. But it's not going to work guys. If it does, they're just going to amplify the problems that we already have right now. So let me know what you guys think about all this in the comments below. And if you enjoyed this video, make sure you subscribe to the channel. And if you don't want to wait for my next video to come out, check out this one on the screen right over here. And I'll see you in the next one.