Wall Street got smacked on Wednesday after President Donald Trump declared war on institutional homebuyers, promising to ban large investors from scooping up more single-family homes. The reaction was swift and brutal.

Blackstone Inc. (BX), one of America's largest owners of residential real estate, tumbled 5.6% in what became its worst trading day since April. The pain spread quickly across the alternative asset management universe. Apollo Global Management Inc. (APO) dropped 5.5%, KKR & Co. Inc. (KKR) fell 3.7%, and Ares Management Corp. (ARES) shed about 3%. Even BlackRock Inc. (BLK), the world's largest asset manager, slumped 3.3%.

Trump framed his announcement around the American Dream, arguing that homeownership has become increasingly unreachable for ordinary families. After years of high inflation and soaring housing costs, he said he would ban large institutional investors from buying additional single-family homes and push Congress to make it law.

"People live in homes, not corporations," Trump declared, promising to unveil more housing affordability proposals during an upcoming speech in Davos.

But Are Wall Street Buyers Really The Problem?

Here's where things get interesting. The data suggests institutional investors aren't quite the housing villain they're made out to be. At their peak, investor purchases represented roughly 27% of U.S. home transactions, according to estimates from The Kobeissi Letter.

But here's the twist: large and "mega" investors make up only about 20% of that investor activity. Do the math, and you're looking at roughly 2% to 3% of total home purchases. During the pandemic buying frenzy, when borrowing was practically free, that share climbed to about 4.8%.

"These purchases are already complete and cannot be 'undone,'" according to The Kobeissi Letter.

"In our view, this will have less of an effect on home prices than most expect," the report noted.

Consider this: U.S. housing demand has already collapsed to a 40-year low. Home sales now represent just 4.7% of occupied homes, according to Reventure data. Even if you completely eliminated all investor purchases, individual buyers would still account for more than 70% of current demand.

The real issue isn't who's buying. It's that nobody's selling.

The Mortgage Lock-In Effect

High interest rates have essentially frozen the resale market solid. Existing homeowners are sitting on mortgages averaging about 4.2%, roughly 200 basis points below today's 30-year fixed rate near 6.2%. That spread represents the widest gap on record, and it creates a powerful incentive to stay put.

Why would anyone voluntarily give up a 3% mortgage just to buy another home at double the rate?

The numbers are staggering: roughly 80% of U.S. borrowers have mortgage rates below 6%, and nearly three-quarters are locked in under 5%. For the first time since 2005, existing homes are actually selling for more than newly built ones, highlighting just how constrained the resale market has become.

In many cases, the most valuable asset tied to a home today isn't the property itself—it's the ultra-low mortgage financing attached to it.

The solution, according to analysts, isn't reducing the number of buyers. It's lower interest rates and more housing supply. Fewer bidders won't help if there's nothing to bid on.