Trump's mortgage bond buyback spurs construction stocks. Who benefits?
Shares of technology platforms in the real estate industry and construction companies rose in early trading on January 9 after US President Donald Trump the day before outlined a plan to buy the US government mortgage bonds for $ 200 billion. Thus, the US President expects to reduce mortgage rates in America and make housing more affordable. Against this background, investors' hopes for the recovery of the real estate market have increased significantly, writes Barron's.
Shares of Opendoor Technologies, which buys and sells real estate, jumped more than 20% on Jan. 9, while mortgage lender Rocket Companies rose 7.9% to its highest level since 2021. Major homebuilders DR Horton, Lennar Corporation and PulteGroup added 5.11%, 5.69% and 5.12%, respectively.
Context
On Thursday evening, January 8, Trump wrote on the social network Truth Social that he instructed the federal government to buy $200 billion worth of mortgage bonds to lower interest rates on mortgages in the United States. He made such a decision to make housing more affordable amid voter concerns ahead of the November midterm elections, Yahoo Finance wrote. The funds will be taken from the reserves of mortgage agencies Fannie Mae and Freddie Mac, which are under government control, Bill Pulte, director of the U.S. Federal Housing Finance Agency, pointed out.
What the analysts are saying
Now, Barron's notes, the situation will depend on how quickly Fannie Mae and Freddie Mac buy back securities. Trump's efforts could result in a 30-year fixed mortgage rate of about 5.5%, as shown, Walter Schmidt, senior vice president of mortgage strategies at FHN Financial, wrote in a Jan. 9 morning note. That could be enough to boost refinancing and home-buying activity, according to the analyst.
Weekly mortgage rates tracked by Freddie Mac were last at 6.16%, Barron's points out. That's 0.77 percentage points lower than a year ago, but still well above the pre-pandemic level, which was close to 4%, the publication notes.
A mortgage rate drop below 6% would carry psychological weight with buyers, Rocket Mortgage Chief Commercial Officer Bill Banfield said in an interview with Barron's. "When mortgage rates start at 5%, you see an increase in demand to refinance and buy a home," he said.
Who stands to gain from Trump's plan
A heating up of the US real estate market could prove beneficial for Opendoor and Rocket, which are up 258% and 71% respectively in 2025, Barron's notes, recalling that their rise was helped, among other things, by the "meme rally" launched last year by Eric Jackson, founder of small hedge fund EMJ Capital. But also lower mortgage rates could improve the sales outlook for real estate developers: they could then reduce the financial incentives offered to attract buyers, which would provide developers with minimal profit margins and help keep the stock steady, Barron's writes. Last year, Lennar shares fell 22% and DR Horton shares rose 1.9% as high real estate prices put pressure on homebuilding, Barron's points out.
This article was AI-translated and verified by a human editor
