FHFA Housing Affordability Initiatives, Iran Unrest, and Muted Market Reactions

Key Quotes

"My main focus, John, has been on reducing mortgage rates to the extent that we can do it and increasing housing affordability. President Trump announced a huge thing last week when he decided that he was going to ban institutions from buying homes. Basically, the concept is that people should be living in homes, not corporations. We have a supply problem in this country, and obviously, we're working on the demand side of things because in some cases, affordability has gotten so tough that people don't even want to buy a home because of what Joe Biden did. And so we're reversing that. That's what we're focused on."

Federal Housing Finance Agency Director Bill Pulte states his primary objective is to lower mortgage rates and improve housing affordability. Pulte explains the rationale behind banning institutional home buying, emphasizing the principle that homes should be for people, not corporations, and that this action addresses a supply problem exacerbated by current affordability issues.

"I would say this, that the president is laser-focused on housing affordability and reversing what has happened these last four years. You look at the average mortgage payment under Joe Biden, it's skyrocketed compared to what it was under President Trump's first term. We are focused on bringing down not only the mortgage rates but also the day-to-day cost and upkeep of homes, which has to do with, you know, whether it be your ongoing expenses, mortgage insurance, etc. There are so many pieces to the cost puzzle that at the FHFA, us Federal Housing, we are working to reduce the cost burden that Americans have."

Director Pulte asserts that President Trump is intensely focused on housing affordability and rectifying the situation from the previous four years. Pulte highlights that the average mortgage payment has significantly increased under the current administration and details the FHFA's efforts to reduce various costs associated with homeownership, beyond just mortgage rates.

"Well, it just makes economic sense. You talk about supply. I mean, you kind of gave me a narrative there, but if you look at the economic supply of things, the fact is you have big corporations buying, using long-term paper, using their balance sheets to scoop up homes in a supply shortage, as we call it. And they're in some cases buying these homes for 20, 30, 40% less than Americans are doing it. President Trump was elected with a very, very popular mandate. Sometimes people don't remember because it was a year ago, but it was a landslide victory, and he was given a mandate to reverse these last four years of crazy inflation that happened under Joe Biden. And so I think it's very appropriate that we're doing everything that we can to reduce housing costs, and we're going to keep doing it, whether it's the institutional ban on buying, looking at all of the things that go into a home and owning a home."

Director Pulte defends the economic rationale behind banning institutional home buying, arguing that large corporations leverage financial resources to acquire homes during a shortage, often at lower prices than individuals. Pulte connects this policy to President Trump's mandate to combat inflation and reduce housing costs.

"The current nationwide protests in Iran continue to have reached a scale and intensity that is unprecedented in the history of the Islamic Republic. Virtually every major city and town is experiencing some form of political protest against the government, calling for regime change, not just complaints against a specific economic policy. And what you have is the tactical government efforts to contain these protests through promises of economic reform have not satisfied the protesters, and increasingly coercive and violent responses by the government have not ended the protests thus far."

Former senior US intelligence official Norman Roule characterizes the nationwide protests in Iran as having an unprecedented scale and intensity within the Islamic Republic's history. Roule notes that protests are occurring in most major cities and towns, with demands for regime change rather than just economic policy grievances, and that government containment efforts have been unsuccessful.

"So, in the 2022 to 2023 situation, for example, the number of the tragic number of deaths, for example, that took place were took place over a much longer period of time. The number of arrests took place over a much longer period of time. So we're watching a compression of this, and this is happening because the inflation, the collapse of the currency, the dissolution with the government, the failed policy, the impression, it's built upon itself since 2017. So you've got an extraordinarily unhappy population that feels the government, correctly so, is feeling that the government is just unable to deliver."

Norman Roule explains that the current situation in Iran is compressed compared to previous protest periods, with a higher number of deaths and arrests occurring over a shorter timeframe. Roule attributes this compression to escalating inflation, currency collapse, government policy failures, and a general sense of dissatisfaction among the population who perceive the government as incapable of delivering.

"The market reaction this morning is very muted, which is telling investors that the key issue continues to be the incoming data."

Torsten Slok, Chief Economist at Apollo, observes that the muted market reaction indicates investors are primarily focused on incoming economic data. Slok suggests this suggests that recent events, while significant, have not fundamentally altered the market's reliance on data for future direction.