The supply of U.S. homes undershot demand by 3.8 million homes in 2024, according to a Realtor.com report. We need to increase the number of houses built by more than 250,000 per year and a Federal Reserve targeted program can accomplish this goal.
Most of these public homebuilders have corporate bonds paying about seven percent interest. The Fed can work with these homebuilders to build low-income and moderate-income housing by buying newly-issued, low-interest corporate bonds paying three or four percent. In order to participate in this program, homebuilders would have to agree to build a certain number of housing units, with a defined number of low-income houses and condominiums.
With the Fed's support, these homebuilders can increase our housing stock and help bring down the cost of owning a home. The Federal Reserve can make a huge difference. Even with high general interest rates, if the Fed provides low-interest money to homebuilders, it will increase the supply of housing and lower housing costs. The Fed needs to think outside the box. And this proposal is not very far outside the box since the Fed is already purchasing corporate bonds.
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