Affordable Housing Won’t Come From Bullying the Fed
Democrats who want to coerce the central bank into lowering rates to ease mortgage costs are asking for trouble.
The Fed can’t build houses.
Photographer: Jordan Vonderhaar/Bloomberg
The housing market is a big worry for Democrats as we move closer to US elections in November. It’s one of the primary reasons measures of consumer confidence remain depressed as a combination of high prices and high mortgage rates keep homes out of reach for many. You have to go back to the dark days of the early 1980s to find the last time Americans in the University of Michigan’s monthly sentiment survey were so downbeat when asked whether it was a good time to buy a home.
All of which explains why President Joe Biden floated the idea in his State of the Union speech in March of providing tax credits to potential homebuyers to help offset the highest mortgage rates in a generation. And also why the New York Times reported last week that some Democrats are urging Biden to take a page from Donald Trump’s playbook and attempt to bully the Federal Reserve into lowering interest rates.
In theory, these ideas sound great — they would presumably put homes within reach of more households and boost transactions. In practice, they would be a disaster. It’s even likely that the unintended effect would be making housing less affordable by pushing up mortgage rates and home prices.