Treasury Secretary Scott Bessent warned that the United States faces a housing market recession caused by the Federal Reserve’s interest rate policies. Bessent said certain sectors of the economy are contracting despite overall national stability. He emphasized that high mortgage rates have severely weakened housing activity and harmed lower-income households.
Bessent explained that the Federal Reserve’s rate hikes created what he called “distributional problems” within the economy. He urged policymakers to lower rates to support home buyers struggling with rising borrowing costs. According to him, reducing mortgage rates would help end the ongoing housing market recession and restore balance to the real estate sector.
The Treasury secretary noted that consumers with greater debt than assets are suffering the most. He argued that these households face mounting financial pressure while wealthier groups continue to benefit from asset gains.
Although the Fed lowered short-term rates, mortgage costs remain elevated because they are tied to long-term bond yields. Jessica Lautz, deputy chief economist at the National Association of Realtors, explained that even slight reductions in mortgage rates could help improve affordability. She added that while borrowing costs have eased in recent months, the overall effect on buyers remains modest.
Freddie Mac data showed the average 30-year fixed mortgage rate dropped to 6.17%, the lowest level in over a year. Despite this improvement, national home sales remain stalled at roughly 4 million annually, compared to 5 million before the pandemic. Lautz noted that homeowners now sell properties less frequently, about once every 11 years instead of every seven.
She also described a growing divide within the housing market. High-income buyers continue building wealth through property investments, while first-time buyers struggle with record prices. Lautz observed that all-cash purchases are at all-time highs, but entry-level ownership has fallen sharply.
Bessent concluded that sustained action by the Federal Reserve is necessary to end the housing market recession and support broader economic recovery.
