An overlooked aspect of President Donald Trump’s proposal to ban institutional investors from purchasing single-family homes is the potential for plummeting home prices in regional hubs to destabilize the residential mortgage lending industry, experts tell Scotsman Guide.
Trump’s announcement on social media Wednesday was positioned as a bid to help restore housing affordability. But no details have been released of how that ban might work, who it might affect or how it will be enforced.
If the president’s goal is to send national home prices lower by flushing the strongest 30% of demand out of the purchase market, thereby triggering price shocks in flourishing and nascent regional hubs across the U.S., doing it “right” would likely go beyond simply banning sales to mega-investors, experts caution.
Others, such as George Papadeas, founder and chief investment officer at Eastview Investment Partners, an investor-lender offering loans for ground-up construction, single-family rental purchases and renovation-and-resale financing, say they are not worried about the ban.
“We can close business-purpose loans in individual’s names,” said Papadeas, in response to Scotsman Guide’s request for a reaction. “This is more to hurt groups that own 1,000-plus homes who are not our clients.”
His clients are among the small- and medium-size investors who control 20% (17 million) of the roughly 86 million single-family homes and townhouses across the U.S. that were “non-owner occupied,” or investor-owned, as of the second quarter of 2025, according to BatchData, a real estate analytics platform designed for real estate investors.
“Most of these investors have a different [limited liability company] for each project,” Papadeas explained. “LLCs’ operating agreements are not recorded, so it would be impossible to track back to one individual.”
A price cushion
Mega-investors that own 1,000-plus homes control just 2.1% of single-family inventory nationwide, prompting BatchData to describe the 90% of investor-buyers with fewer than 11 properties as “critical liquidity” in a mid-2025 market analysis, helping to prevent “potentially destabilizing price volatility” amid weak purchase demand.
Contrary to popular perceptions of institutional mega-investors hoarding U.S. real estate, more than four-fifths (87%) of investor-owned, single-family homes are owned by small-time entrepreneurs with 1 to 5 properties in their portfolio, BatchData says. Seasoned single-family investors have shared similar figures with Scotsman Guide.
Accounting for about 3 in 10 home sales in 2025, and even crossing the 100,000-unit threshold in May, June and July, it’s these homebuyers who have propped up U.S. home sales since the pandemic — as well as home values that may otherwise have adjusted lower more quickly amid a severe home purchase affordability crunch.
Investor share fluctuated between 15.7% and 20% from January 2018 to January 2020, according to tracking by real estate analytics firm Cotality. The annual pace of existing-home sales has been near three-decade lows through the end of 2025 for three straight years.
A trickle of affordability has begun to return to the housing market, as rising inventories, cooling home prices and slightly lower mortgage rates have eased new mortgage application loan amounts, leaving mortgage industry stakeholders optimistic about a modestly stronger originations market in 2026, fueled by a strong spring season.
Buyers who expect to live in their new homes will compete with those who intend to operate the home as a rental property, capturing cash flow, appreciation and equity along the way — or else renovating the property and reselling it into the market.
In the post-pandemic housing market, investors have a distinct edge, causing their rising purchase share to amplify price pressures in competitive markets. For affordability-constrained homebuyers in those markets, potential home-price impacts of a broad restriction on single-family investing could amount to a significant win.
For mortgage lenders, a broad restriction could put the entire industry’s profitability at risk, not just that of investor-lenders. If purchase unit gains do not outpace accelerated softening in regional home prices, it may drive further contraction in average mortgage sizes that already sit at 18-month lows.
Years of shifting purchase demand
“While a ban aims to increase volume from non-investor borrowers, the ‘cost to originate’ for a first-time buyer is significantly higher than for a corporate entity, and a surge in volume may not materialize if interest rates remain high,” says Selma Hepp, chief economist at Cotality, in a note to Scotsman Guide.
This could create what she describes as a “liquidity shock in high-concentration markets like Atlanta, Phoenix and Charlotte,” where she says investor-buyer share is currently more than 30%.
“This could lead to a rapid downward repricing of local ‘comparables,’ potentially triggering a regional softening that erodes equity for existing homeowners and creates a vacuum that only cash-rich individual buyers (or small investors) — not the average first-time homebuyer — can fill,” Hepp adds. In other markets, “the impact would be negligible.”
Most housing observers agree that to ban or restrict mega-investors’ purchases of single-family homes would do little to shift non-investor competition with the other 90% of investor-buyers who own 11 properties or fewer.
Banning or restricting purchases of single-family homes by that 90% of investors could flush investor demand from the market, but risks tanking home sales in regional housing markets that flourished through the pandemic. Such a ban would effectively deactivate the price shield investors offer against rapid price declines during a period of widescale price softening and concentrated declines regionally.
As a symptom and a driver of that shift, access to cash is playing an increasingly important role in driving home sales, be it in the form of downpayment gifts, a pile of home equity or investor capital. The K-shaped quality of the post-pandemic economy trickles through the mortgage system, too.
Lenders who have weathered fears of falling loan counts, especially among purchases, are now confronting a protracted period of falling loan amounts post-pandemic.
The majority of independent mortgage banks and mortgage subsidiaries of chartered banks polled by the Mortgage Bankers Association (MBA) have only reported five profitable quarters in the 15 quarters going back to the start of 2022 — including eight consecutive quarters in the red beginning in April 2022.
Stubbornly, as the average income earned per origination increased for mortgage lenders in 2025, according to Freddie Mac, so too did the costs to produce that loan.
“Ultimately, the policy risks disproportionately benefit high-wealth borrowers who can leverage cash to snap up discounted inventory, while traditional lenders see their revenues compressed by a combination of smaller loans and more rigorous underwriting requirements,” says Hepp.
Declining loan counts
Loan production costs are spread across two axes: loan volume and loan size. Low production has plagued lenders in recent years, best imagined as a protracted hangover from overly stimulative COVID-era economic policies, exacerbated by the Federal Reserve’s pivot to quantitative tightening in March 2022.
Total originations exceeded 13 million units for consecutive years in 2020 and 2021, raking in fees from a frenzy of more than 8.5 million refinance transactions each year.
In 2023 and 2024, total mortgage originations hit just 4.5 million units, according to Home Mortgage Disclosure Act data — the lowest annual loan counts in records going back to at least 2004. The MBA projects that total one- to four-family originations exceeded 5.4 million in 2025 and will rise to around 5.8 million through 2028.
But purchase counts of just 3.4 million in 2025 are only expected to grow to around 3.7 million in 2026, then to 3.8 million in 2027. Purchase volumes between 3.3 million and 3.4 million units in 2023 and 2024 were last observed in 2014 and 2015.
Amid the purchase drought, a second hangover is hitting the mortgage industry, reflected in rising median downpayment share of home sales prices, pressure on debt-to-income (DTI) ratios from rising taxes and insurance, and cooling home prices. Loan amounts are also declining.
“Loan volume is a derivative of loan size times the number of loans you make,” says Doug Duncan, former chief economist of Fannie Mae. “Most measures of loan origination costs aggregate all costs and divide by the number of closed loans.”
He says that a lender’s “fallout rate,” representing the costs incurred for mortgage applications that do not result in a loan, should come sharply into focus as loan counts and loan sizes are shrinking.
Steadily falling loan amounts
The average mortgage size hit an 18-month low in November at $378,063, off a peak of around $454,400 in March 2022, according to MBA data. The 2025 low of $372,745 in July was 18% lower than the 2022 peak, but 75% higher than the average mortgage size of $211,900 in January 2012.
From loan officers to servicers, the industry is wired to create the largest mortgages they can while complying with the loan limits adjusted annually by the country’s largest mortgage investors: Fannie Mae, Freddie Mac and Ginnie Mae.
Loan amounts across regional hubs with heavy concentrations of single-family investor activity could spiral lower, should a broad investing ban cause a liquidity or price shock of the variety Hepp describes.
Homeownership costs across the monthly mortgage payment calculation have spiked since 2019, crushing mortgage demand. Property tax increases driven by home price appreciation and homeowners insurance costs that comprised nearly 10% of the typical mortgage payment in 2025 are squeezing principal out of DTI ratios.
To make the math work, borrowers often try to raise their downpayment to reduce the loan amount. So as principal is getting squeezed out by rising costs like taxes and insurance, cash in the form of higher downpayment share is eating away at the financeable remainder, which effectively slows price softening as the access-to-credit threshold confronts the access-to-cash threshold.
Until Trump’s soft launch of a single-family purchase ban, every expectation was for investor-buyers to maintain their elevated activity next year, in select markets, following favorable appreciation or rental demand trends. Average 30-year fixed mortgage rates are widely expected to remain in their current range of 6% to 6.5% through next year, meaning affordability gains for non-investor buyers are tied primarily to price softening and relative wage growth.
“We look forward to learning more about the administration’s forthcoming proposals and have offered targeted recommendations to reduce housing costs,” read an MBA statement shared in response to Scotsman Guide’s request for perspective on the development.
Shifting fundamentals for profitability
Figures published in November by the National Association of Realtors show that downpayments in the third quarter of 2025 were 118% higher than the third quarter of 2019. The median downpayment as a share of home price has risen from around 10% in 2013 to 19% in 2025, reflecting how home financing has moved up the wealth ladder.
Repeat buyers flush with home equity from pandemic-era price gains have recorded an even steeper increase in median downpayment share, from around 13% in 2013 to 23% in 2025. Median downpayment share among first-time homebuyers has risen to 10% in 2025 from around 5% in 2013, as their purchase share has crumbled post-pandemic.
Duncan says repeat buyers “typically have more financial resources, and when the Fed was rapidly raising rates to fight inflation, repeat buyer households offset that interest cost to some degree by making bigger downpayments.”
Real median personal income, a measure taken by the U.S. Census Bureau that accounts for inflation, has risen from $35,660 in 2012 to $45,140 as of 2024. Cotality says it required an annual income of $94,500 to afford a median-priced home of $425,000 in November.
“The rule of thumb regarding median household income and median house price is that a household can afford to buy three times their income,” says Duncan. “If they are getting a mortgage, then interest rates impact that ratio in that, as rates fall, the household can afford a higher price and vice versa.”
The 2008 financial crisis sent the average sales price of an existing home from a pre-crisis peak of $230,000 in July 2006 to a 21st century low of $155,000 in January 2012. Since then, home prices nationwide and loan amounts have steadily risen.
Home price appreciation has outpaced real wage growth since the 1970s, in aggregate, but the gains of the past 15 years — and the last five years especially — have taken a heavy toll on price-to-income ratios for home sales. Last year brought concentrated cooling to investor-heavy markets in Florida and Texas, states feeling particularly strong pressures from rising insurance costs.
Pulling the price floor out of select regional markets could hit the reset button on home values in certain areas but runs the risk of concentrating home value declines hyper-locally, potentially posing numerous fair lending and disparate impact challenges that would send tremors through the broader housing finance system.
