Do Trump’s Policies Make Housing More Affordable? Morgan Stanley Weighs In

President Donald Trump’s housing-related announcements and proposals would be “modestly helpful” in improving housing affordability, according to Morgan Stanley strategists. Trump is expected to provide more details on his housing plans this week in Davos.

“No single action from the GSEs could bring mortgage rates down to the 4% they averaged in the 2010s; this would require a move in Treasury rates,” James Egan and Jay Bacow wrote in a report on Sunday. 

The government-sponsored enterprises’ (GSEs) purchases of mortgage-backed securities (MBS) — which began in 2025 but which Trump has directed Fannie Mae and Freddie Mac to accelerate — have tightened mortgage spreads by about 15 basis points since the day after the announcement. 

That move briefly pushed mortgage rates below 6% for the first time since 2022. Still, the strategists only slightly revised their year-end forecast, now expecting rates to finish at 5.6%, down from 5.75% previously.

“The limited impact stems from the current distribution of mortgage rates: roughly two-thirds of mortgages still carry a rate below 5%,” the strategists wrote. “While affordability might be improved for the buyer, it won’t necessarily ‘unlock’ substantial additional supply to be purchased.”
A potential ban on large institutional investors purchasing single-family homes would also have limited impact, the strategists said, as institutional ownership remains relatively small.

No silver bullet 

Egan and Bacow suggested several additional steps policymakers could consider, including reducing loan-level price adjustments at the GSEs and lowering mortgage insurance premiums at Ginnie Mae. Regulators could also reduce risk weights on conventional mortgages, which would increase bank demand for MBS.

On the monetary policy front, new Federal Reserve board members could be more willing to end mortgage runoff from the Fed’s balance sheet. The central bank has already helped the sector by cutting rates 75bps since September, contributing to an estimated 20-basis-point decline in mortgage rates.

“Alone, none of these steps would have a meaningful impact on the mortgage rate or mortgage spread,” the strategists wrote. “But in combination we could see them lowering the mortgage rate by another 50bp.” 

Regarding other ideas, the strategists wrote that tax credits could pull forward demand, but their effects tend to be temporary. Expanding new supply could help ease affordability pressures by softening home prices, but inventory levels are already at their highest since 2007, they added.