Housing Affordability Is A Zero-Sum Game

America’s housing problem has no clean solution.

Renters need prices to fall. Homeowners need them to stay high. Policymakers are stuck between the two.

President Trump has acknowledged voter anger over affordability and floated a series of proposals, from 50-year mortgages to banning Wall Street buyers from single-family homes and letting Americans tap 401(k)s for down payments.

These ideas may boost purchasing power, but they do little to address the core issue. Housing supply remains tight.

Analysts warn that easier financing can even make things worse. According to the AEI Housing Center, mortgage rates falling to 4.5% without new supply would push prices higher over the next three years. Lower borrowing costs tend to get capitalized into higher home values.

Data from Realtor.com $NWSA ( ▲ 1.07% ) lays out the harsh math.

To return affordability to 2019 levels, one of three things must happen. Median household income would need to rise about 56%. Mortgage rates would need to fall to roughly 2.65%. Or home prices would have to drop around 35%.

Each path carries political and economic consequences. Existing homeowners hold a near-record $34 trillion in housing equity, according to the Federal Reserve. Builders fear oversupplying the market. Policymakers worry about denting consumer spending tied to home equity.

The result? Paralysis.

Housing remains a zero-sum game. Helping first-time buyers means someone else has to take the hit, and few in power are willing to choose who that should be.