Fed Officials Say Fixing U.S. Housing Market Depends More on Supply Than Financing

Two senior Federal Reserve officials on Friday expressed doubts that a Trump administration proposal to lower housing costs by purchasing hundreds of billions of dollars in mortgage-backed securities will significantly improve conditions in the housing market.

The officials—Atlanta Federal Reserve President Raphael Bostic and Richmond Federal Reserve President Thomas Barkin—argued that while borrowing costs are an important factor, housing affordability is driven even more by the availability of homes for sale.

Bostic said that many of the affordability challenges facing the housing market extend beyond financing alone and reflect long-standing supply-and-demand imbalances across major metropolitan areas.

“I do think that a lot of the housing affordability challenges are about more than just financing, and there’s a supply and demand issue that has persisted in many major markets,” Bostic said.

Drawing on his background as a housing economist, Bostic emphasized the broader role housing plays in economic and family stability.

“Housing is critically important for families and for providing the stability people need to make long-term plans,” he said, adding that while financing matters, it is only one part of the equation. “If we want to ensure people can afford to buy homes, all of these factors need to be addressed together.”

Barkin echoed those views, saying that the most effective way to improve affordability lies on the supply side.

“When it comes to making housing more affordable, the answer is really about increasing supply,” Barkin said. He acknowledged that large-scale purchases of mortgage bonds could influence mortgage markets depending on the maturity of the assets involved and could potentially lower mortgage rates. However, he questioned whether such purchases would meaningfully address affordability without parallel efforts to bring more homes onto the market.

“I’m an advocate for initiatives that actually increase the number of homes available,” Barkin said, adding that it remains unclear whether government bond purchases would materially improve affordability outcomes.

Administration Says Mortgage Bond Purchases Have Begun

The comments followed an announcement by President Donald Trump outlining a plan to use funds from government-sponsored housing lenders to purchase up to $200 billion in mortgage-backed securities. The initiative aims to reduce mortgage borrowing costs, which remain elevated following the Federal Reserve’s aggressive tightening campaign to combat inflation.

The head of the Federal Housing Finance Agency said on Friday that the purchasing program has already begun, with approximately $3 billion in mortgage bonds acquired so far. He did not provide a timeline for when the full amount of planned purchases would be completed.

The announcement has supported mortgage bond prices and boosted shares of homebuilding companies. Still, analysts caution that the overall impact on mortgage rates may be limited. Estimates suggest that $200 billion in bond purchases could lower mortgage rates by roughly 10 to 25 basis points, potentially bringing the standard 30-year mortgage rate down to around 6.0% from about 6.21%.

Although the administration’s effort is formally separate from Federal Reserve policy, it closely resembles quantitative easing—a tool traditionally used by central banks to stimulate the economy by purchasing bonds, raising asset prices, and lowering yields. Mortgage-backed securities purchases were a central component of the Federal Reserve’s response during the COVID-19 pandemic.

Beginning in the spring of 2020, the Fed expanded its holdings of mortgage-backed securities from roughly $1.4 trillion to a peak of $2.7 trillion by mid-2022. The central bank currently holds about $2 trillion in such assets, compared with total housing-related debt of $13.1 trillion as of the third quarter.

The administration’s willingness to conduct large-scale mortgage bond purchases outside of a financial crisis blurs the traditional distinction between normal economic conditions and emergency market interventions.

An analyst noted that the move suggests the government is prepared to deploy crisis-style tools even in the absence of a recession or financial emergency, signaling a readiness to use all available policy levers to influence housing markets.