MW How amateur investors are looking to cash in on Trump's new affordability push
By Gordon Gottsegen
Retail investors are making aggressive bets on a rebound in the residential-building sector
Trump has publicly stated that he wants lower mortgage rates
It's the one thing President Donald Trump and New York City Mayor Zohran Mamdani, a democratic socialist, appear to agree on: Living in America has gotten too expensive.
Recently, politicians have spent a lot of time talking about "affordability" for everyday Americans. While it's a broad umbrella term, a lot of the focus surrounds housing costs. According to the December consumer-price index, inflation in shelter costs remains stubbornly high, encompassing things like rent, hotel lodging and home insurance.
One of the ways Trump is now hoping to address this concern - after having previously called affordability both a made-up word and a Democratic Party-orchestrated hoax - is by nudging mortgage rates lower. In recent days he has significantly intensified a pressure campaign against Federal Reserve Chair Jerome Powell over interest rates and said the federal government would purchase $200 billion in mortgage bonds.
A subset of retail investors is expressing faith that mortgage rates will eventually move down. But beyond biding their time in hopes of one day buying homes of their own, some of these investors are aiming to cash in on that expectation by putting their money to work in the stock market.
See: New year's lower interest rates met with sudden surge in mortgage demand
Retail-investor activity is picking up for stocks in the residential-building business, exceeding typically norms.
Retail investors have been pouring money into builder stocks, betting that lower mortgage rates will benefit the housing industry. This has manifested in an uptick in retail fund flows into the State Street SPDR S&P Homebuilders ETF XHB, which has gained 11% since the start of January. Retail investors have also been buying more call options for home-builder stocks, according to financial research firm Vanda, which represents an aggressive bet that those stocks will climb in the near future.
"We are seeing a trend where Trump's 'improve affordability' agenda is driving sector rotations, especially given the lack of macro conviction. U.S. homebuilders have seen a rush of interest from the retail community as a bet on who benefits the most from lower housing costs. This has been particularly evident in retail buying of the XHB ETF, though there is plenty of room for retail to keep buying this theme," Jai Malhi, a senior strategist at Vanda, told MarketWatch.
Stocks in the real-estate sector have had a tough time over the past few months. The S&P 500 Real Estate Sector Index XX:SP500.60 is currently the worst performer among all 11 S&P 500 industry sectors for the past 12 months, returning about 5% over that time.
However, this downturn has led to some dip buying among retail investors, falling in line with the tendency of individuals to buy stocks that have been selling off in order to benefit from a rebound. Vanda noted that Builders FirstSource Inc. (BLDR) is one of the stocks that benefited from this dip-buying behavior.
Homes are unaffordable for many young Americans
Buying a home isn't cheap, and that's especially true today. Ask any Millennial or Gen Z member looking to buy their first home and they'll tell you that homeownership is now seen as a luxury, while previous generations may have taken that milestone for granted. The data back up this generational housing divide. The median age for all U.S. home purchasers is now 59, according to Apollo. In 2010, the median age was 39.
This points to more young people holding off on buying a first home, and seniors downsizing taking over the starter-home market.
The median age of U.S. homebuyers has been climbing in recent years.
This is due to a variety of factors, including high home prices since the COVID-19 pandemic, elevated mortgage rates and insufficient supply to meet demand. While this is a major issue in the U.S., it's one some politicians have been vocal about trying to solve, and, with the midterm elections around the corner, Americans are already seeing more campaign pitches for affordability.
Trump has postulated his own ideas to improve affordability, including things like capping interest rates for credit cards. But while JPMorgan Chase's chief financial officer said such a move would be "very bad for consumers, very bad for the economy," other affordability moves like bringing down mortgage rates could benefit certain industries in addition to consumers.
The benefit of lower rates is twofold. Residential builders often rely on loans to fund upfront construction costs. Lower interest rates would bring down costs on those loans. In addition, the typical buyer in America needs to take out a mortgage to fund their purchase. So when mortgage rates are higher, fewer people are able to enter the market to buy.
If mortgage rates do fall, more Americans will be able to afford to buy a home, the beaten-down housing sector could see a rebound, and retail investors betting on this pocket of the stock market could see a nice return.
"Looking ahead, we expect that retail investors will continue to closely follow Trump's policy headlines and sector rotations to be dictated by the agenda to improve affordability for consumers ahead of this year's midterms," Malhi told MarketWatch.
-Gordon Gottsegen
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(END) Dow Jones Newswires
January 14, 2026 07:49 ET (12:49 GMT)
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