High mortgage rates push Biden to seek housing assistance

High mortgage rates push Biden to seek housing assistance

High mortgage rates push Biden to seek housing assistance

President Biden and his economic team, concerned that high mortgage rates and housing costs are harming Americans and hindering his re-election bid, are looking for new ways to make housing more available and affordable.

Mr. Biden’s next budget request will call on Congress to pass a series of initiatives aimed at building more affordable housing and helping some Americans afford to buy a home. The president is also expected to address housing affordability for homeowners and renters in his State of the Union address next week, according to people familiar with the speech schedule.

THURSDAY, administration officials announced a handful of relatively modest executive actions, including measures to increase the supply of manufactured homes. White House officials said this week they would announce “additional steps we are taking to reduce housing costs.”

The increased focus on housing affordability comes as congressional Republicans attack Mr. Biden over high mortgage rates and housing costs, and as the president’s allies warn those costs are hurting class-mate voters worker he needs to win in November.

There is little Mr. Biden can do immediately and directly to affect mortgage rates. These are heavily influenced by the Federal Reserve’s interest rate policy, and the White House is careful not to appear to be pressuring the central bank to lower rates. Fed officials have indicated they plan to begin cutting rates this year.

New research from economists at Harvard University and the International Monetary Fund — including Lawrence H. Summers, the former Treasury Secretary — suggests that high mortgage rates and other borrowing costs are contributing to Americans’ relatively gloomy mood at the moment. regard to the economy, despite a low unemployment rate and healthy growth. By weighing on consumer confidence, these costs could depress Mr. Biden’s re-election hopes.

“If you are Biden, you encourage the Fed to continue lowering inflation and lowering interest rates,” Judd NL Cramer, a Harvard economist and one of the paper’s authors, said in a statement. interview. The president should be particularly concerned about this, he added, “because consumers are more aware of these borrowing costs than we think.”

Mr. Biden has made a habit of asking his aides about the current state of mortgage rates, which have more than doubled since he took office and since the Fed raised rates to combat the worst inflation crisis for four decades.

THE average mortgage rate over 30 years jumped to almost 8% last fall, up from less than 3% in 2021. It declined slightly this year, but recently rose again and is now just below 7%.

Monthly payments for future homeowners have skyrocketed due to this increase. THE monthly payment for a typical mortgage for a $400,000 home — which is just below the national median sales price — costs about $2,900 at a 7 percent interest rate, assuming a 20 percent down payment. That’s about $800 more per month than the payment would be at a 3 percent rate.

The increased burden of high borrowing costs can make buying a home prohibitive, which is part of the reason why surveys show young adults in particular are concerned about home prices. Mr Cramer said his research suggests high mortgage rates also frustrate existing homeowners, who may want to sell their homes but have seen the ranks of potential buyers thin because fewer people can afford to pay the asking price.

The study, released Monday as a working paper from the National Bureau of Economic Research, seeks to shed light on a conundrum of the Biden economy: why consumer confidence remains lower than the historical evidence it suggests, being given that the job market is strong and wages are high. rising.

Drawing in part on other methods of calculating inflation rates in the past, the researchers — Mr. Cramer, Mr. Summers and Karl Oskar Schulz of Harvard, as well as Marijn A. Bolhuis of the IMF — conclude that the Rising borrowing costs for homes, cars and more under Mr. Biden largely explain the depression in sentiment.

“Consumers, unlike modern economists, view the cost of money as part of their cost of living,” they write.

White House economists have done their own calculations on consumer confidence. They note that this situation is largely hampered by persistently high food prices and residual frustration linked to the coronavirus pandemic. In recent months, as mortgage rates fell slightly, they calculated that housing problems were helping to improve consumer sentiment.

Still, Mr. Biden’s aides say they know how difficult housing costs are for Americans. They are looking for ways to mitigate them, even marginally, before the elections.

The president has already tried, unsuccessfully, to persuade Congress to pass sweeping plans to build more affordable housing, as well as help for some Americans trying to buy a home, such as help with paying a deposit for people whose parents are not owners. Republicans who control the House have not been receptive to these proposals this year.

“The president views the long-term shortage of affordable housing as one of the most important outstanding issues,” Jared Bernstein, chairman of the White House Council of Economic Advisers, said in an interview.

Research suggests that lower mortgage rates could quickly elevate Mr. Biden with consumers and in his campaign. They suggest that the slight decline in rates over the past few months is one reason the sentiment emerged late last year and early this one.

White House officials agree. But, they hasten to add, Mr. Biden will not push the Fed to cut rates.