Haymaker Daily
On a half-century loan
Hello, Subscribers:
We’re not sure who said it first, but the maxim about taking Trump seriously but not literally remains good advice, for the sake of a tempered national conversation, if nothing else.
Regardless of your opinion of Trump, what’s indisputable his how he throws ideas out into the national conversation with little regard for a) how they will be received, b) their viability, c) if they sound at all politically wise, or d) what unintended consequences they might have on the industries, nations, populations to which they apply. There is always a phenomenon of disproportion in play when Trump speaks on matters of consequence. A quick, 40-syllable remark from Trump reliably turns into a mundane segment where legacy media explains (at great length) why whatever he said could never work.
And guess what? When it comes to the 50-year mortgage rate, they’re actually right. It’s a bad idea because it would stack more chips in the banks’ favor, would do little to reduce monthly payments, and ultimately fails to address the larger problems with housing affordability. The elephant in the room is a combination of inventory and rates, and that’s where Trump’s attention should really be.
As you can see below, home ownership has been much lower in years past, but there’s no arguing that it’s doing particularly well at the moment. Potential buyers are either priced out, afraid to move before the promised land of lower interest rates re-appears, or simply can’t find what they’re looking for in their market(s) of choice.
To the extent that any government or Trumpian focus should be on mortgage duration, it should be in the other direction. How about working with banks on some incentives to provide 12-, 16-, and 20-year mortgages? Maybe foster a federal program that incentivizes first-time (or even second- and third-time) buyers to pay-off more of what they owe in the first five years. Maybe the banks won’t like that part, but they do like houses to change hands, and circulating real estate is good for them. Stagnation is, of course, much worse for business than financially prudent borrowers.
Whatever comes of Trump’s real-time, stream-of-consciousness brainstorming, the 50-year mortgage proposal belongs with New Coke, Joanie Loves Chachi, and Michael Jordan’s baseball career in the collective waste basket of social memory.
David “The Haymaker” Hay
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50 year mortgages would be a disaster for the borrowers just compare amortization schedules for 30 v 50. The problem also isn’t rates, unless you’re referring to the FED keeping rates at the zero bound from 2010-2023 with a tiny short-lived uptick once or twice during that period.
The problem is all that free money led to overconsumption of housing inventory and thereby bidding up housing prices. The current 10 year Treasury is about where it’s averaged for the last 50 years.