Concerned that increased mortgage rates and housing costs are hurting Americans and hindering his re-election, President Biden and his economic team are looking for new ways to make housing more available and affordable.
Mr. Biden’s upcoming budget request will call on Congress to pass a series of initiatives to build more affordable housing and help certain Americans afford to buy a home. The president is also expected to address housing affordability for both homeowners and renters in his State of the Union address next week, people familiar with the speech planning say.
On Thursday, government officials announced a handful of relatively modest executive actions, including steps to increase the supply of manufactured homes. White House officials said this week they would announce “additional actions we are taking to reduce housing costs.”
The increased focus on housing affordability comes as Republicans in Congress attack Mr. Biden over high mortgage rates and housing costs, and allies of the president warn that those costs are weighing on working-class voters he must win in November.
There is little Mr. Biden can do immediately and directly to influence 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 cut rates. Fed officials have signaled they expect to begin cutting interest rates later 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 about the economy, despite low unemployment and healthy growth . As these costs weigh on consumer confidence, they could dampen Mr. Biden’s re-election hopes.
“If you’re Biden, you cheer for inflation to continue to fall and for the Fed to cut interest rates,” Judd NL Cramer, a Harvard economist and one of the paper’s authors, said in an interview. This should be particularly important to the president, he added, “because consumers are more aware of these borrowing costs than we give them credit for.”
Mr. Biden has made a habit of asking advisers about the current state of mortgage rates, which have more than doubled since he took office and as the Fed raised rates to combat the worst rise in inflation in four decades.
The average 30-year mortgage rate rose last fall from under 3 percent to nearly 8 percent in 2021. This year it has fallen slightly, but has recently risen again and is now almost 7 percent.
Monthly payments for prospective homeowners have skyrocketed due to the increase. The monthly payment for a typical mortgage for a home worth $400,000 – which is just below the national average sales price – is about $2,900 with an interest rate of 7 percent and a down payment of 20 percent. That’s about $800 more per month than the payment would be at a 3 percent interest rate.
The increased burden of high borrowing costs can make purchasing a home seem unaffordable, which is one reason surveys show younger adults in particular are concerned about home prices. Mr. Cramer said his research suggests that high mortgage rates are also frustrating existing homeowners who may want to sell their home but are finding that the number of potential buyers has fallen because fewer people can afford their asking price pay.
The study, released Monday as a working paper from the National Bureau of Economic Research, aims to shed light on a conundrum of the Biden economy: why consumer sentiment remains lower than historical evidence suggests, given the strong labor market and wages rising.
The researchers — Mr. Cramer, Mr. Summers and Karl Oskar Schulz of Harvard and Marijn A. Bolhuis of the IMF — rely in part on alternative methods of calculating past inflation rates and conclude that rising borrowing costs for houses, cars, etc under Mr. Biden are responsible for much of the depressed mood.
“Unlike modern economists, consumers view the cost of money as part of their cost of living,” they write.
White House economists have conducted their own calculations on consumer sentiment. They note it is largely impacted by persistently high food prices and ongoing frustration over the coronavirus pandemic. In recent months, as mortgage rates fell slightly, they estimated that housing issues helped lift consumer sentiment.
Still, Mr. Biden’s advisers say they know how difficult housing costs are for Americans. Before the election, they look for ways to alleviate this even at the margins.
The president has already tried to persuade Congress to pass sweeping plans to build more affordable housing units, along with aid for certain Americans who want to buy homes, such as: B. Down payment assistance for people whose parents do not own their own home. Republicans who control the House were not receptive to those proposals this year.
“The president views the long-term shortage of affordable housing as one of the most important unfinished business we have,” Jared Bernstein, chairman of the White House Council of Economic Advisers, said in an interview.
The research suggests that a decline in mortgage rates could quickly give Mr. Biden a boost among consumers and in his campaign. They believe that the slight decline in interest rates in recent months was one reason why sentiment rose at the end of last year and the beginning of this year.
White House officials agree. However, they quickly add that Mr. Biden will not pressure the Fed to cut interest rates.
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2024-03-01 14:51:18
www.nytimes.com