A MARTÍNEZ, HOST:
President Trump has a suggestion - lower monthly mortgage payments. He posted a picture on Truth Social this weekend titled Great American Presidents. It has a portrait of FDR under the banner 30-Year Mortgage. Now, above Trump's head, 50-Year Mortgage. Susan Wachter is a professor of real estate and finance at the Wharton School of Business at the University of Pennsylvania. Susan, so a 50-year mortgage, would that make housing more affordable?
SUSAN WACHTER: It might. It's not a good substitute for a 30-year mortgage because it comes with risks - risk to the borrower and to the overall market.
MARTÍNEZ: Yeah, because when you think about it, if it's going to be 20 more years than a 30-year mortgage, the risks are there, right? Anything could happen in between those 20 years that could really be disastrous.
WACHTER: Exactly. And not just a risk, but you're not building up wealth, which is one of the points of being a homeowner, is to build that wealth that you can't do as a renter.
MARTÍNEZ: Yeah, because then the interest rate piles up. That's something you still have to pay, and you're paying that for a longer amount of time. But what about the argument that, hey, it's going to lower monthly payments? So if it's going to lower monthly payments, it'll help people get into housing.
WACHTER: It will. And that's the plus side. That's a small silver lining of this problematic cloud. But it's not going to take over the market, simply because of the risks involved. But we've got to do something, and getting people into home ownership in a market where rents are going up 'cause that's where the jobs are is a challenge and an important challenge for local markets and for America as a whole. This is a generation that's at a point where they would become homeowners, and they're simply not. And hope is a problem, hope to become a homeowner and overcome that threat of being evicted as a renter as rents go up.
MARTÍNEZ: Yeah. You mentioned hope, though, and that's something that's very important to people. You got to have the hope to be able to accomplish things, to kind of go out and maybe even get through your day sometimes, I think. But when I think about it, according to the National Association of Realtors, the first-time buyer, typical average age is about 40, an all-time high of 40, which would mean if someone takes a 50-year mortgage, they'd be 90 before they paid off the loan. I mean, I don't know. I can't even plan for next week. Susan, can you imagine planning 50 years ahead of?
WACHTER: Yeah, exactly. There's - that's all - that wraps it up, that this is not the solution. However, we need to find a solution, and this can - lowering the mortgage payments in the short run, temporarily, as well as lower down payments for a select portion of the population. Some localities who are already subsidizing home ownership because they need those workers - and subsidizing renting - there are a number of potential possibilities, and we need all-hands-on-deck approach to solving this affordability problem.
MARTÍNEZ: Sometimes when people have a mortgage, they refinance to maybe take care of other bills, things that may come up that you can't control. With a 50-year mortgage, can you see that as a possibility, too?
WACHTER: Yes, exactly. That could happen for a small segment of the population, that - it could be for local governments who also, at the same time, provide more housing - more physical housing - 'cause ultimately, this is a supply problem. We don't have those starter homes.
MARTÍNEZ: Is a 50-year mortgage even legal?
WACHTER: No. It's a - that's a big question right now. FHFA, which is the overseer of Fannie and Freddie, precludes it. So we're a long way from actually seeing a product such as this.
MARTÍNEZ: And you mentioned just more housing, right? That's the simple answer when it comes to improving housing affordability, is having more homes available. But how likely is that?
WACHTER: Well, I do think that there's more attention to this issue, and I do think there's room for more supply. We used to be a nation that did supply housing. I think there are steps we can take, and I think that mortgage market and interest rates are part of the problem and will have to be part of the solution. But this is not an instrument that's going to solve for most millennials and Generation Z and even the next generation up to have the options and hope that their siblings and parents had.
MARTÍNEZ: That's Susan Wachter, professor of real estate and finance at the Wharton School of Business. Susan, thank you.
WACHTER: Thank you. Transcript provided by NPR, Copyright NPR.
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