Analysts see lower rates – but not a thawed market
Recent White House moves to jolt the US housing market, including a headline $200 billion government‑backed mortgage purchase program, stirred hopes of a meaningful reset for borrowers. Morgan Stanley’s securitized products team instead cast the measures as a welcome but limited tweak to an already distorted landscape.
In a recent podcast and research note, co‑heads of securitized products research Jay Bacow and James Egan said the administration’s efforts nudge borrowing costs lower but does little to change the fundamental calculus for owners locked into ultra‑low‑rate loans or for buyers facing tight supply and elevated prices.
Modest relief, not a reset
Bacow pointed to Trump’s directive for Fannie Mae and Freddie Mac to purchase $200 billion in mortgages, on top of what the market already expected.
“The mortgage market round numbers is a $10 trillion market, so in the scope of the size of the market, it’s not huge,” he said.
Still, the buying program is large enough that “mortgage spreads tightened about 15 basis points and headline mortgage rates rallied to below 6 percent for the first time since 2022 on some mortgage measures,” he said.
Egan noted that the move only slightly altered their 2026 outlook.
“We already had the mortgage rate getting to about 5.75 in the back half of this year. This would take that forecast down to about 5.6 percent,” he said.
That change, he added, has “a very modest upward implication” for purchase volumes, nudging their existing home sales forecast to roughly 4.25–4.3 million from 4.23 million.
“The limited impact stems from the current distribution of mortgage rates: roughly two‑thirds of mortgages still carry a rate below 5 percent,” Egan and Bacow wrote.
“While affordability might be improved for the buyer, it won’t necessarily ‘unlock’ substantial additional supply to be purchased.”
Structural lock‑in and demographic headwinds
That so‑called lock‑in effect sits at the heart of the Morgan Stanley view. Apollo Global Management chief economist Torsten Slok argued that because an estimated 40% of US homes carried no mortgage at all, the effective lock‑in is even more acute than standard mortgage data suggests.
Demographic pressures add another layer. Slok has highlighted that US families with children under 18 peaked at around 37 million in 2007 before slipping to about 33 million by 2024, reshaping demand for larger homes.
Limited role for bans and further policy tweaks
Beyond the GSE purchase program, the administration has floated a possible ban on large institutional investors buying single‑family homes.
Morgan Stanley’s team played down its importance, arguing that such investors “simply do not own enough homes” to move national price levels, and many have already been shrinking their footprints.
Sean Dobson, chief executive of single‑family rental giant The Amherst Group, pushed back on efforts to scapegoat landlords.
Blaming institutional investors for affordability problems “gets both the problem and the solution wrong,” he told Fortune, arguing instead that “years of policy failure” have “probably made housing unaffordable for a whole generation of Americans.”
Dobson boiled the affordability equation down to three levers: “You can only reach affordability one of three ways: by changing the price of the home, the price of the money, or the income of the family.”
Amherst’s analytics, he said, implied that would mean home prices falling by roughly a third, mortgage rates dropping toward 4.6%, or household incomes jumping by more than 50% – none of which looked imminent.
Morgan Stanley outlined a similar menu of incremental steps, from trimming loan‑level pricing adjustments and guarantee fees at the GSEs to lowering risk weights on conventional mortgages and halting mortgage bond run‑off at the Federal Reserve.
“Alone, none of these steps would have a meaningful impact on the mortgage rate or mortgage spread,” Egan and Bacow wrote.
“But in combination we could see them lowering the mortgage rate by another 50bp.”
Even that, they stressed, could not restore the 4% average mortgage rates of the 2010s without a broader move lower in Treasury yields.
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