What can President Trump do to fix the housing crisis?

10-year interest rate and mortgage interest rate

My prediction for 2025 includes:

• A mortgage interest rate range between 7.25%-5.75%
• A bandwidth for the ten-year interest rate between 4.70% and 3.80%

Despite all the smoke and jazz of the past week, mortgage rates were actually very low. On inauguration night we saw some movement in 10-year yields, but judging by all the headlines, mortgage rates haven’t moved up or down much over the past week. To me, the labor market is the most important thing for rates, and unemployment benefits numbers rose a bit last week, but between the cold weather and the LA wildfires, the market largely ignored that as well. I discussed Trump’s demand for lower mortgages this podcast.

To lower mortgage rates, President Trump can play the role of a basketball coach who serves as a referee (Federal Reserve Chairman Powell) to get a call to go his way, but Treasury Secretary nominee Scott Bessent would have more influence. However, if President Trump continues to pressure the Fed and labor market data weakens, this could put pressure on the Fed to act faster.

Mortgage spreads

To put it simply, if mortgage spreads did not improve from the worst spreads we saw in 2023, we would most likely already be losing construction workers and home sales would not have had the recent rebound in sales from record levels. .

The US housing market would have been much worse without better spreads in 2024 and now 2025. If we applied the worst spread levels of 2023 to current interest rates, we would see a further 0.79% increase in mortgage rates – almost close to 8%. On the other hand, if mortgage spreads were at their normal levels, we could expect mortgage rates to be about 0.74 to 0.84% ​​lower than they are now, meaning mortgage rates would be close to 6%.

Some people have asked me if President Trump has the authority to direct someone to buy mortgage-backed securities to improve spreads, which could then help grow sales with mortgage rates approaching 6%. My answer is no. However, we should look to the Treasury Department, especially if Bessent suggests that the government-sponsored enterprises (GSEs), which are still in receivership, could use some of their revenues to buy MBS. This scenario is more likely than President Trump requesting funding from Congress to lower mortgage rates.

For my 2025 forecast, I expected an average spread improvement of 0.27%-0.41%, compared to the 2024 average of 2.54%. We are close to reaching that average spread range, and the target is to improve and maintain better spreads when returns decline.

Buy application data

Purchase requests data had a slightly positive week, up 1% week-over-week, and is up 2% year-over-year. So we’re on a two-week winning streak here.

Last year this data line was very pessimistic when we had mortgage rates between 6.75% and 7.50%, with 14 negative weeks, two positive and two flat week-to-week prints.

I’m sure President Trump would like to see lower rates so he doesn’t have to worry about construction workers losing their jobs during his presidency, something I identified as a wildcard before the start of 2025.

Weekly ongoing sales

The latest weekly current contract data from Alto’s research provides critical insights into real-time trends in housing demand. Existing home sales reported Friday exceeded the estimate, but our weekly data has weakened lately. I expect this softness to show up in ongoing home sales data NAR soon after raising the low bar for sales. We are still higher than the 2023 level; If the mortgage interest rate can only go towards 6%, we will have turnover growth.

Weekly current contracts from the past week over the past years:

• 2025: 266,015
• 2024: 275,559
• 2023: 241,975

Weekly home inventory data

As we enter 2025, we’ll be keeping a close eye on inventory data performance. Over the past decade, we have typically observed the lowest inventory levels in February, just like last year. However, in the years following COVID-19, the seasonal low began to shift into March and April, which is concerning.

This is a date line that I’m sure President Trump would like to see, because one of his promises is that more housing supply will come onto the market, and with housing permits at recession levels, the fastest way to get inventory obtain from the sale of existing houses. market.

So far, inventory data looks promising as we look back to 2019 inventory levels, which were the lowest in five decades before the impact of COVID-19.

• Weekly Inventory Change (January 17 – January 24): Inventory increased from 632,118 Unpleasant 636,580
• Same week last year (January 19 – January 26): Stock fell from 506,373 Unpleasant 503,192
• The lowest inventory level of all time was in 2022 240,497
• The inventory peak for 2024 was 739,434
• For some context, there were active listings for the same week in 2015 938,452

New advertising data

Our new listing data reflects homes coming to market without an immediate contract, giving us a real-time view of any sales pressure in the market. The past five years have seen the lowest activity levels in history.

Last year I expected us to reach at least 80,000 new listings during seasonal peaks, but that didn’t happen; I was off by about 5,000. From 2013 to 2019, peak seasonal weeks recorded between 80,000 and 110,000 listings. Unfortunately, the last two years have seen the lowest levels ever seen.

During the housing bubble years, this data line was between 250,000 and 400,000 per week. However, we had put pressure on credit vendors then, which is not the case now. New offers last week from recent years:

• 2025: 50,955
• 2024: 44,921
• 2023: 42,843

Price reduction percentage

In an average year, it is common for around a third of all homes to see a price drop, reflecting the usual dynamics of the housing market. We are in a period of seasonal decline in terms of price reductions; we are now lower than in 2023 but higher than in 2024.

Price reduction percentages for the past week compared to previous years:

• 2025: 32.96%
• 2024: 31%
• 2023: 34%

Next week: Fed Week with lots of economic data

It’s Fed Week! After President Trump’s comments about interest rates Last week we can expect interesting questions and answers following the Fed’s announcement this week. This week we also have a lot of economic data to look forward to, including new home sales, home prices, PCE inflation, and some bond auctions. As always, unemployment claims data will be released Thursday. It is striking that we have seen an increase in the number of claims in the past week.

Also keep an eye on ongoing home sales data this week; upcoming reports will show the softness reflected in our weekly pending contract data.