Appraisals and Why You Should Care

Now onto home supply.

Homebuilders are caught between a rock and a hard place. High interest rates are already squeezing demand, and now tariffs could make building material costs go up like it’s a gosh dang Pokémon card. Builders rely on Canada for lumber and Mexico for hardware, and Trump’s paused 25% tariffs on both countries are set to expire March 1. If they kick back in, expect construction costs (and home prices) to rise even more.

Here’s the silver lining: if mortgage rates can drop closer to 6%, it would ease some of the builders struggles and potentially make buying a home more affordable. The problem… the reality is that, we’re just not there yet.

Rates only take a dive when the market starts freaking out about a recession, and while I am quite aware there is a ton of doomsday hype, jobless claims are vibing (SEE: VIBESESSION).

SO WHAT CAN THE FED DO?

I think it’s time we shift our attention to the Fed. Some of us need a little relearning session (me, I need to remember what they do).

Reminder, The Federal Reserve has very little control over one of inflation’s biggest drivers, housing costs. Powell admitted this week that while the Fed can move short-term interest rates, 30-year mortgage rates are a whole different beast. They’re tied to 10-year Treasury yields, which react to investor expectations about inflation and recession risks.

Even when the Fed does lower rates, it’s not a guarantee that mortgage rates will fall. Why? Because lower rates usually increase buyer demand, which could push prices even higher.

Powell also warned that a growing crisis in the insurance industry could make getting a mortgage harder in certain areas over the next decade. Banks and insurers are already pulling out of fire-prone and coastal regions due to climate risks, which means fewer financing options for homebuyers in those areas.

What’s the solution? More housing supply, I know I said this already, but Powell was blunt and it’s not something the Fed can fix. So, while everyone’s waiting for rate cuts, the real long-term issue remains the lack of available homes. And until that changes, it sorta feels like I’ll be doing the same song and dance every week!

Sources:

• Rising inflation deals blow to potential interest rate cuts – Jeff Andrews
• Will higher inflation and mortgage rates create a recession? – Logan Mohtashami
• Why The Fed Is Mostly Powerless To Lower Housing Inflation – Diccon Hyatt
• Powell predicts a time when mortgages will be impossible to get in parts of US – Claire Boston