U.S. Government to Backstop Mortgages Above $1 Million in High-Cost Areas
The housing market has cooled off after the FEDs intervention by reducing the money supply which increases the interest rate. The high-interest rate has caused first-time home buyers not to qualify (interested in) to buy a home. The continuous appreciation of houses still attracts investors to the buying of houses. As explained in the article, Fannie Mac and Freddie Mac are enterprises sponsored by the U.S. government, are planning to approve support for Mortgages above $1 Million even though the loan limit is $647,200 in 2022 which is already set to increase to $726,200. These enterprises are interested in jumbo loans (loans that are above the loan limit) more than conforming loans (below the loan limit) because it brings about high-down payment and higher closing cost which attracts only rich clients.
The increase in jumbo loans will offset the FEDs' action in the past to cool off the housing market. This will not only cause an increase in the housing market but also serve as an investment tool for upper-class people in society, which will most definitely yield and grow spontaneously unless there is a housing market crash like in 2008. These in turn help to support investment and increase saving from the upper-class people of the society, which only helps to concentrate more of the wealth of the nation into already rich individuals.
https://www.wsj.com/articles/u-s-government-to-backstop-mortgages-above-1-million-mark-for-first-time-11669740331?mod=economy_lead_story
It will be interesting to see if the housing market will continue to cool down even with the implementation of these jumbo loans. We'll see if they truly cause a distribution in the market.
ReplyDeleteCould this expand the wealth gap? Also could high home prices impact younger generations ability to buy a house?
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DeleteYes, I believe, it will widen the wealth gap, if the government goes on with their plans. and It might even be better for we young generation to get into the housing market now instead of waiting. Because these home prices might just continue to get higher
DeleteOverall, great post! I think it will be interesting to see how the housing market is affected as well as important for young adults like ourselves to watch.
ReplyDeleteHousing prices have been on the decline for a few months now. However, they are still higher than they were a year ago. I think the increase in jumbo loans will clash with the declining housing prices and have negative consequences on the housing market in general.
ReplyDeleteIt's interesting that Fed efforts to increase rates may soon be opposed by the possible approval of these jumbo loans. If they do get approved we'll see if the market continues to cool off or not.
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