FHFA director Pulte calls on Powell to lower the interest rates
Higher rates stop the GSE reform
After President Trump posted last week that he gave ‘serious consideration’ to release the GSEs from the conservatory, Finance Minister Scott Bessent went to Bloomberg to give more context. I wrote about the possible implications of taking Freddie Mac And Fannie Mae From a conservatory, especially in the light of the current mortgage interest and the 10-year-old Treasury revenue, which are higher than the administration wants.
As Bessert stated, if the analysis of the Trump administration concludes that the release of the GSEs will lead to a higher mortgage interest rate, they will not start the process. Given the various priorities that the White House manages, the switch from Freddie and Fannie from the conservatory – in particular when approaching interim elections and continuous challenges with regard to trade – can be significant risks. Lower mortgage interest rate can give the White House a better background to remove Freddie and Fannie from the conservatory.
The construction of houses is at the recessien levels of COVID-19
At the beginning of the year I wrote about my concern about housing builders and new housing sales if the mortgage interest rate would rise even more of their increased levels. This is important because housing data is crucial to assess whether the economy is going in a recession. Monitoring trends among residential construction employees are important, because a decrease in this sector can often indicate that a recession can approach, as you can see in the graph below.
In the most recent job report I have noticed a slight decrease in work in this area and the confidence of builders is currently at levels that are reminiscent of COVID-19. The current high mortgage interest rate influences the wishes of home builders and the ability to build more houses.
Waging a trade war is easier with lower rates
I recently continued CNBC To talk about the lower rates the healing for rates. I say this because Trump saw how the American economy performed better, even in an inflatory environment because the rates were lower. Even when the wood prices were $ 1500 per thousand board feet during Covid, new home sales and existing home sales were much higher because the rates were lower. This is why the White House spoke about wanting a lower return of 10 years, which means lower mortgage interest.
The trade war drama has sometimes had the bond market checked the White House and the president believes it will be easier if the rates are lower. That is why I think we may see a potential “shadow” president, where Trump will present his next FED president in a media tour to talk the markets in lower rates. This is something that Besent raised in October 2024.
Conclusion
It is not surprising that Bill Pulte has tweeted a message with a lower rate, because many have spoken similar feelings close to the White House. The most important question is: which actions will be taken as an answer?
Bessent is planning to change specific regulations to enable financial companies to keep a larger amount of bonds, but the effectiveness of this step is still uncertain. The housing market can shift with relatively small changes, such as mortgage interest that approaches 6%, which can have a significant impact. However, if this approach does not yield the desired results, the president can consider alternative strategies, such as appointing a president of the Shadow Fed. The housing market 2025 has just become much more interesting with the developments in recent days.
