Which Housing Stocks Will Benefit From Trump's 50-Year Mortgage Plans

Over the weekend, President Donald Trump floated the idea of a 50-year mortgage in a post on Truth Social. On Saturday, Federal Housing Finance Agency director Bill Pulte confirmed the plans – calling a 50-year mortgage a "game changer."

This is President Trump's latest move to try to thaw the housing market. Last year on the campaign trail, he promised to lower housing costs by slashing regulations to incentivize new homebuilding.

While that move would help boost supply (more on that in a bit), his latest idea looks to address the demand side of the market.

At its simplest, a 50-year mortgage is a way to try to boost affordability for homebuyers by lowering their monthly payment compared with the standard 30-year mortgage. But will it have the intended effect? And what does it mean for stocks in the housing sector?

We'll start by answering the first question…

Does the 50-Year Mortgage Really Make Homes More Affordable?

As Realtor.com explained in an analysis of the 50-year mortgage...

Assuming for the sake of argument that mortgage rates were equal across both products, a 50-year mortgage would lower mortgage payments by about $250 per month on a $400,000 home, assuming 10% down and a 6.25% mortgage rate.

Now, $250 a month is a good chunk of change – $3,000 per year. That's plenty of money to fund a vacation, put in a savings account, or even invest.

But while a cheaper monthly payment via a 50-year mortgage may make homebuying more affordable up front, it will hurt borrowers in the long run compared with the standard financing now. Plus, as we'll explain, it just might make housing less affordable for others in the future.

First, a longer mortgage loan means it will take borrowers longer to pay off the home – and they'll pay much more interest to banks (especially early in the loan term) and build less equity with smaller principal payments. More from Realtor.com...

Total interest payments over the life of the 50-year loan would amount to $816,396, compared to $438,156 on the 30-year loan, a difference of $378,240. That amounts to 86% more interest over the life of the loan.

Yes, that's nearly double the amount of interest paid on a 30-year mortgage. That's just more debt for everyone.

So the 50-year mortgage's impact on affordability is "questionable" at best.

Realtor.com senior economist Joel Berner wrote that the longer loan terms would add to the potential pool of buyers without increasing supply. That would push home prices higher, wiping out any affordability increases from the lower monthly payment.

The Real Issue Isn't Demand – It's Supply

Berner added that low demand is not the problem for the housing market. Instead, there's a limited supply of homes, and that's keeping activity in the housing market under pressure.

My colleagues at True Wealth and True Wealth Systems have been on top of it. As Steve Sjuggerud explained in the April 2021 issue of True Wealth Systems...

Demand for homes is strong, while housing supply remains nearly nonexistent.

For example, this week, CNN reported on a Washington, D.C. home that received 88 offers within a four-day period. And 76 of those offers were to buy the house in cash.

More than four and a half years later, those factors are still in play – even with higher mortgage rates hurting affordability. According to a report from online real estate marketplace Zillow, the U.S.'s housing shortage has now hit 4.7 million. Up from 4.3 million in 2021.

Real estate management firm CBRE has a lower estimate of a 2 million home shortage. But that's still significant...

Put simply, we need to build millions of single-family homes or apartments to meet the current demand for housing. Fixing that imbalance is usually where homebuilders come in...

But in August (the last available data before the government shutdown), homebuilders only started construction on 1.3 million homes (annualized). That's not nearly enough to make up the huge gap anytime soon.

Low Supply Shows Demand Is There

Mortgage rates have been a hot topic lately. Hitting a high near 8%, financing a home purchase became extremely unattractive. And that put the housing market on ice temporarily.

While you may think that would lead to a glut of supply, that didn't happen…

In the September issue of True Wealth Systems, our colleague Brett Eversole highlighted that housing supply (as measured by months to meet demand) didn't spike as mortgage rates hurt demand in 2022 and 2023. From that issue...

But monthly supply remained under 4.5 months, less than its benchmark from the late '90s and early 2000s.

In other words, housing demand has proved inelastic... pointing again to a massive pool of homebuyers waiting on the sidelines.

So the demand is there. The obstacles have been 7% or 8% mortgage rates and a limited supply in the market. And it's ready to flood off the sidelines as soon as mortgage rates come down further or if homebuilders increase supply.

We've already seen progress on one of those fronts…

The average 30-year mortgage loan today is around 6.2%. That's down from more than 7% in January and a multiyear high near 8% in 2023, but rates need to go even lower to start juicing homebuying and selling again.

As Corey McLaughlin explained in the October 16 Stansberry Digest…

Remember, a lot of homebuyers (or refinancers) from the pandemic era have mortgage rates well below current levels.

Approximately 55% of U.S. homeowners have a mortgage loan with a rate below 4% and around 80% have one below 6%. Those are incentives to stay put in a current home.

To get those folks to even consider selling their house and buying another one, mortgage rates need to come down. That's happening now, but more progress needs to be made.

Which Stocks Would Benefit from a 50-Year Mortgage?

Mortgage finance companies are the clear winners from a proposed 50-year mortgage. As I wrote above, a 50-year mortgage nearly doubles the interest payments to the company writing the mortgage.

Rocket (RKT) is the biggest player in the space, with a market cap of $50 billion. Rocket bills itself as a one-stop shop for home and finance services. Its segments include Rocket Mortgage (financing), Rocket Close (appraisal and settlement), and Rocket Homes (an online home search network).

And investors sent the stock higher after the headline on a 50-year mortgage…

The stock jumped more than 10% on the first two days of the week. So folks are clearly seeing Rocket as a beneficiary of this proposal. But does that make it a long-term buy?

Let's take a look at how Rocket does on our proprietary Stansberry Score…

Rocket gets an overall grade of 51 on the Stansberry Score – ranking it 2,402 out of the 4,615 stocks we cover. Under the hood, it gets a C for financials and an A for capital efficiency.

But with negative earnings, and an enterprise value to EBITDA (earnings before interest, taxes, depreciation, and amortization) of 88 times, Rocket isn't cheap today. So it's no surprise that Rocket gets an F for valuation.

Our Stansberry Score sees better buys out there today.

Other Stocks to Watch

Now let's dive into a couple of other housing stocks to see if there are better buying opportunities to play the housing market's thaw…

First, we're going to look at NVR (NVR). Longtime Stansberry readers know this is one of our favorite companies – not just in the homebuilding space, but in any industry. Put simply, NVR pioneered the "land-light" model for homebuilders.

Instead of buying lots and waiting to build when demand comes, NVR purchases options from land developers via a small deposit and only buys the lots when it's ready to build homes.

That protects it from a downturn in housing because it hasn't spent money to hold on to empty lots with no buyers.

Looking at our Stansberry Score, NVR gets an overall score of 55. It gets an A for capital efficiency (because of its land-light model) and a B for valuation. Its financials bring the score down, with NVR only getting a D for this metric.

Because of the ongoing slowdown in housing, NVR's revenue and earnings growth have slowed in recent years, even briefly turning negative before bouncing back positive. This isn't just related to NVR… other homebuilders like KB Home (KBH) and Lennar (LEN) get "C" grades for financials.

Both of these companies have followed NVR's lead into the land-light model. And it's showing up in their own scores… Both get an A for capital efficiency.

The financial grades should improve with the housing market. So these three land-light homebuilders are ones to watch for a rebound in housing – with or without the 50-year mortgage.