A Housing Market without Fannie Mae and Freddie Mac: Effect on Home Prices

Econometric analysis of Fannie Mae’s and Freddie Mac’s interventions in the housing market suggests that their interventions have led to higher housing prices, which may have adversely affected poor and low-income groups. Liquidating Fannie Mae and Freddie Mac is more likely to increase homeownership. While such a policy might increase interest rates in the near term, it would also lead to lower median home prices, which in turn would increase the ability of low-income groups to purchase a house. It would also enhance competition among financial institutions, leading to lower interest rates in the medium to long term.

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