The American housing market in the first half of the 2020s was marked by extraordinarily high prices and limited supply. In 2026, though, a new wrinkle as emerged: mortgage rates are dropping, while home prices remain stubbornly high — with supply still constricted, relatively preferable rates are only creating more competition again.
President Donald Trump’s new housing agenda could complicate this situation even further, per Yahoo Finance. Increasing demand while supply remains locked below it is likely to send home prices rising yet again.
President Trump’s Risky Plan To Lower Mortgage Rates
Currently, the average 30-year fixed mortgage rate is as low as it’s been in a few years (resting near 6%), in part because of President Trump’s radical insistence that Fannie Mae and Freddie Mac buy up to $200 billion in mortgage bonds to keep borrowing costs low. These much lower mortgage rates can increase a potential homebuyer’s purchasing ability by lowering monthly payments, which in turn can increase more demand in a limited-supply market.
The risk inherent in President Trump’s plan? This increase in buying ability will likely put upward pressure on home prices, especially in a housing market with low inventory. According to The Economic Times, real estate experts and economists have already warned that even minor dips in borrowing costs can lead to price hikes in conditions such as these. In short: first-time buyers may pay more for a new home, even as their financing costs decrease.
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How Trump’s Plan Could Backfire
The reach of President Trump’s housing plan goes beyond bond purchases, though. Recently, at the World Economic Forum in Davos, Trump outlined executive actions to limit large investors’ purchasing ability of single-family homes, announcing that this will allow homes to be more affordable and accessible to families rather businesses.
Once again, though, real estate experts are dubious — they argue that without meaningful increases in housing supply, Trump’s demand-side strategies are unlikely to lower prices, and could instead increase competition for limited starter homes, per Reuters.
Bottom Line
For first-time buyers, this changing math of lower mortgage rates versus higher home prices means that affordability is not simply a matter of financing costs, but also of complicated market dynamics that are dictated by politics and policy, supply limitations, and competition in an increasingly competitive housing market. Rather simplifying home purchasing, Trump’s plan may have just made it more complicated.
Editor’s note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.
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This article originally appeared on GOBankingRates.com: Lower Mortgage Rates, Higher Prices? How Trump’s Plan Affects First-Time Buyers
