Name: The Housing Market Just FLIPPED!
Uploaded: 2026-01-12T18:07:18.000Z
Duration: 12 min 1 s
Description: Thousands of YouTube videos with English-Chinese subtitles! Now you can learn to understand native speakers, expand your vocabulary, and improve your pronunciation...

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He revealed his new plan to fix the housing problem.

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If you are planning to buy a house or you are thinking to buy a house, then you must watch this video here.

In this video we will try to answer a few questions.

What is Trump's new plan to fix the housing problem?

And how this plan could theoretically lead to 2008 style financial crisis.

So if you're ready, give this video a thumbs up and let's get right into it.

Trump just instructed to buy $200 billion worth of mortgage backed securities to bring interest rates down for mortgages.

For most people, the mortgage rate is what determines the final price of their house.

So if we can theoretically bring down mortgage rates to 5% or 4%, housing is going to be way more affordable.

Over the last 12 months, mortgage rates have dropped down from about 7% to as low as 6.16% for 30 year mortgages.

But a lot of people still find this very confusing.

The Federal Reserve has lowered interest rates to 3.5%.

Why are mortgage rates are not going down to 3.5% since at the end of the day it is the Federal Reserve that sets the interest rates across the country.

However, whether you like it or not, the Federal Reserve has nothing to do with mortgage rates.

If you want to know who sets really your mortgage rates, you have to understand how the mortgage market actually works.

This is how most people think that mortgages are set.

On one side you have the bank that offers the mortgage.

On the other side, this is you, the client or the borrower who takes the mortgage.

So theoretically it seems like it, it's the bank that decides whether they will lend you the money at 6% or 7%.

So the evil banks right now are charging so much and Donald Trump is going to save the American people by forcing the banks to bring down the mortgage rates.

Unfortunately, it does not works like that.

First of all, they are 30 year mortgages, which means that if the bank is going to offer you a mortgage for the next 30 years, you it is taking the risk of anything that could happen within that range.

So if inflation will get out of control, if the US Dollar will become worthless, if the United States will no longer become the most powerful economy in the world, which is why the bank doesn't actually want that mortgage.

It created two organizations which are called Freddie Mac and Fannie Mae.

Their job is, is to take all these mortgages, bundle them into one giant Security called Mortgage backed Security and sell them to investors.

So the demand for mortgage backed securities is going to determine your mortgage rate.

For example, if investors are asking for 7% on mortgage backed securities, then Freddie Mac on Fannie Mae can only sell them when they have mortgages that have 7%, which is why they're only going to buy mortgages from the banks that have 7% mortgage rates, which is why the bank is forced to offer you that mortgage at 7% interest rate.

However, if there is such a strong demand by these investors for these mortgage backed securities and they're competing to buy them, suddenly Freddie Mac and Fannie Mae will offer lower mortgage rates, maybe 4%, maybe 3%, which means that now the bank can offer lower mortgage rates because they know that they can sell them for a lower rate, since the demand for the mortgage backed securities will determine your mortgage rate.

Both of these organizations are sitting on $200 billion worth of assets.

These assets include both mortgage backed securities, US Treasuries, cash, and a lot of liquid investments.

So why don't we take these $200 billion and buy $200 billion worth of mortgage backed securities?

That strong demand for the mortgage backed securities theoretically could bring down mortgage rates.

The mortgage backed securities market is huge.

It's worth about $13 trillion with a daily volume of $300 billion.

So while $200 billion seems like a lot of money, you can see that it is not going to make a huge difference.

It still should theoretically bring down mortgage rates.

So the real question is that how much of an impact these $200 billion are going to make on mortgage rates?

The problem is that if you look at the mortgage rates, you will see that back in 2020 and 2021, mortgage rates hit their block bottom of about 2.65%.

And this happened primarily because again, the government decided to force the Federal Reserve to buy hundreds of billions of dollars of mortgage backed securities.

If you look at the balance sheet of the Fed, you will see that starting From March of 2020 to 2022, the Federal Reserve purchased $1.3 billion worth of mortgage backed securities.

And in April of 2020 alone, it purchased $300 billion worth worth of mortgage backed securities.

So $1.3 trillion forced mortgage rates between 2020 to 2021 to go down by a single percentage point.

So if $1.3 billion or $1.3 trillion brought down mortgage rates by a single percentage point, how Much of an impact do you think $200 billion are going to do?

Yes, theoretically they will bring down mortgage rates, but probably by 0.1%, 0.2%.

Here is the biggest problem with the mortgage backed securities.

Mortgage backed securities are investments like any other investments and they're competing in the market for investors money.

So in one slide you have a bunch of people with trillions of dollars if you combine all of their wealth and they're thinking how can we possibly invest our money to that is a safe investment and maximizes our return.

So if you look at the market, the best investment is of course the stock market.

Over the last 12 months alone, the S&P 500 grew by 20%.

So you can literally make 20% by investing in the stock market.

Why would you invest in the mortgage backed securities where you can get right now 6% and if mortgage rates will be brought down to 4%, then nobody is going to buy the mortgage backed securities.

So who exactly is going to loan you the mortgage?

And that's why you have to understand that the stock market is growing exponentially by 20%.

By the way, if you want to know my investing strategy for 2026, then check out the first link in the description of this video.

Some stocks within the stock market has grown by 200%, 100%, 500%.

And that's why investors are more likely to invest their money in the stock market than mortgage backed securities.

The second type of investment is of course short term Treasuries.

Why investors are buying short term Treasuries when they can make much more money buying mortgage backed securities.

First of all, this is just a three month treasury, which means that if I'm an investor and I'm buying short term Treasuries, the Treasury will expire in three months and I will get my money back.

While if I'm actually buying mortgage backed securities, I'm locking my money for the next 30 years.

The risks with mortgage backed securities is a lot more than short term Treasuries.

And that's why the demand for the mortgage backed securities will always be much higher than mortgage backed securities.

And short term Treasuries are also guaranteed by the US government.

So you know for a fact that you are going to get your money back.

And now compare all of these investments to mortgage backed securities.

Before 2008, everybody thought that the mortgage market or the housing market is immune to default.

But 2008 proved to the world that even if the US government is backing these mortgages, the housing market could still collapse.

that's why, because of that extra risk that investors are taking by investing in mortgage backed securities, mortgage backed securities have to offer a higher interest rate to compensate for that risk.

So many things could happen within the next 30 years.

What if inflation gets out of control and it gets to 5%, 6%.

And if you have locked your money at 5% interest rate for the next 30 years, then you're guaranteed to lose money when, which is why the demand for mortgage backed securities is very low and that's why the rates on them are extremely high.

Now if you want to compare mortgage backed securities, the best comparison are long term government bonds that are 30 year government bonds.

Currently they have a yield of 4.8% while mortgage backed securities have a yield of about a little over 6%.

So because 30 year bonds are much safer than mortgage backed securities and investors are willing to accept a lower rate by investing in them than in mortgage backed securities.

And that's why mortgage backed securities right now have a much higher interest rate, which is why your mortgage is at least 6%.

Ideally, if inflation will continue rising, your mortgage will continue rising.

So you could theoretically throw $200 billion and create this artificial demand.

It might last for a few months, maybe six months, and

then mortgage rates will climb back to their previous levels.

But here is the biggest problem with Trump's plan.

This is not the first time that Fannie Mae and Freddie Mac are buying mortgage backed securities.

Prior to 2008 financial crisis, both of these companies have been massively buying mortgage backed securities to make mortgages much more affordable across America.

And by 2008, they had a combined portfolio of $1.8 trillion worth of mortgage backed securities.

The moment the housing market collapsed, both of these companies collapsed as well.

And the U.S. government had to bail them out by spending hundreds of billions of dollars.

But there was one contingency that the government is going to bail them out.

But after the crisis, they will start liquidating their mortgage backed securities.

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The Housing Market Just FLIPPED!

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