Rising mortgages are muddling the GOP’s housing message

Por Cassandra Dumay — POLITICO – TOP Stories

Inflation is throwing a wrench into Republican messaging on housing affordability.

GOP lawmakers went to great lengths this summer to draw bipartisan support for sweeping legislation to make housing more affordable, passing the 21st Century ROAD to Housing Act in June — even defying President Donald Trump’s demands to add his controversial elections bill to the legislation.

But Trump’s war against Iran has sent energy prices soaring, pushing up inflation that increases the price of home loans. The interest rate on mortgages reached almost 7% this past week — the highest point since the beginning of the president’s second term. And the Federal Reserve’s move Wednesday to raise its benchmark interest rate for the first time in three years is likely to bring on a new era of high borrowing costs.

Ahead of November’s election, GOP campaigns have been touting a law designed to make housing affordable in the long term by boosting construction, but they risk being tuned out by mortgage rates that are making it more expensive to buy homes already on the market.

“These are the mortgage rates today that were there when I bought my first house, and I don’t like them. I want them lower,” said Rep. Mike Flood, a Nebraska Republican who led House efforts to pass the bipartisan housing law. “As we get the supply going and we work to make it more affordable — it’s going to take a little while.”

Housing is an issue at the top of voters’ minds. A Bipartisan Policy Center poll published in May found 79% of registered voters identify the cost of housing as an “extremely or very important issue.” However, the impact of Congress’ new law — which largely focuses on boosting the construction of affordable homes — will likely take months or years to make a difference in the currently strained housing market.

For the White House, that means following a familiar playbook: blaming the Biden administration for high costs.

“At the end of President Trump’s first term in January 2021, mortgage rates were at a historic low. Joe Biden and Democrats then spent the next year fueling the worst inflation crisis in a generation,” White House spokesperson Kush Desai said in a statement. “President Trump and Republicans inherited this mess and have been focused on cleaning it up.”

The rates on 30-year mortgages had begun dropping — at one point dipping below 6% — in Trump’s second term. But weeks out from the midterms, home loans carry close to the same interest as they did when he took office last year.

GOP campaign leadership is similarly hoping to pin current economic hardship on past Democratic governance.

“We’re going to go to the voters and make the case and remind them how things were under Democrats,” National Republican Congressional Committee Chair Richard Hudson (R-N.C.) said in an interview. “They drove us to record-high inflation.”

“Democrats like Sherrod Brown failed to deliver meaningful housing reform for decades,” National Republican Senatorial Committee spokesperson Bernadette Breslin said in a statement, referring to the former Democratic Senate Banking committee chair running to retake his seat in Ohio. Brown’s campaign did not immediately return a request for comment.

“Real relief for families is only possible under a Republican Senate majority,” Breslin added.

But Trump promised on the campaign trail to bring down the cost of home loans. In one stump speech, he vowed that interest rates on mortgages would drop to 2%. Halfway through his second term, that’s looking less likely than ever. It’s fueling concern on the right that undecided voters may not buy the argument that Democrats are still to blame.

“That’s what [Vice President JD Vance has been] saying — basically that the other guys are going to mess it up more, and it takes time to fix these things,” said GOP pollster Brent Buchanan. “The average voter just looks at Washington and says, ‘Why is nothing working?’”

Trump has complicated matters by offering mixed messaging on the housing supply legislation.

Before the law was passed, the White House successfully pushed Congress to include a provision meant to keep private equity investors from competing with families looking to buy homes. Though Trump highlighted the effort in his State of the Union address, he later refused to sign the legislation — calling it “a big yawn.”

Meanwhile, Democrats say rising mortgage rates reflect their broader argument that Republicans are failing to help Americans pay their bills.

“Costs are up for everything — groceries, gas, utilities, health care, housing — and it’s all the direct result of Donald Trump’s policies,” Sen. Elizabeth Warren (D-Mass.) said in an interview. “The midterms are more important than ever because it’s the one chance to put some restrictions on Donald Trump and this disastrous path he has put our economy on.”

The administration was able to temporarily lower the cost of home loans early this year after Trump directed Federal Housing Finance Director Bill Pulte to purchase $200 billion in mortgage bonds off the public market. That action drove up short-term demand for the bonds, allowing lenders to offer cheaper loans, but the trend reversed after the broader economic shocks caused by the United States’ and Israel’s initial strikes on Iran.

Wall Street’s expectations for inflation across the U.S. economy play a key role in the interest rates that homebuyers face in their monthly mortgage payments. As the war in Iran pushes up energy prices and Trump’s tariffs destabilize consumer prices, investors have become increasingly nervous. The result: more expensive home loans.

Democratic campaign strategists expect inflated housing costs to carry extra political weight in Arizona and some parts of Texas — states that will be key to determining the House and Senate majorities.

“The housing crisis is an issue that resonates across the country, sure, but you are seeing it play out especially in markets where supply is tight and prices are too damn high,” said Viet Shelton, a spokesperson for the Democratic Congressional Campaign Committee. He added that those markets are “places where Democrats are on offense and poised to pick-up seats.”

The president has repeatedly pressured the Fed to cut its own short-term lending rates — a move that usually makes borrowing, including mortgages, less expensive across the economy. But the independent central bank has resisted, worried that making loans cheaper would only incentivize higher spending and put more upward pressure on inflation.

Financial industry experts don’t expect mortgage rates to come down significantly before November — unless the president quickly resolves the Middle East conflict or makes progress in his contentious international trade negotiations.

“The most obvious [solution] is some type of resolution in the Strait of Hormuz,” said Cristian deRitis, managing director at the economic research firm Moody’s Analytics. “That certainly would start to bring prices down pretty quickly.”

Still, Hudson said he’s confident voters will connect higher costs this year with their past economic frustrations under Democratic government.

“It’s kind of hard for [Democrats] to make the case that inflation started a few months ago when we started the conflict in Iran,” Hudson said. “I mean, it’s factually incorrect, and everyone knows it. So good luck selling that.”

Fonte: POLITICO – TOP Stories