'Upside down economically': Here's why the housing market probably won't get more affordable if the Fed cuts rates
Markets have their eye on the Fed's likely interest rate cut in September, but Peter Boockvar, the CIO of One Point BFG Wealth Partners, has a two-part thesis as to why housing will stay expensive, even if the Fed trims its benchmark rate.
It's a tough time for prospective buyers. The 30-year fixed mortgage rate, the most popular home loan in the US, is hovering around 6.5%. That's down slightly from highs above 7% this year, but still well-above levels seen in the period of 15 years that followed the financial crisis.
Here's why afforability might not improve even if the Fed loosens monetary policy, in Boockvar's view:
1. Fed rate cuts won't pull down long-term rates
When the Fed cuts rates, it most directly impacts short-term interest rates in the economy. That's unlikely to have a sizable influence over the longer-term rates, Boockvar said, speaking to CNBC on Tuesday. That's important to note because longer-term rates, like the 10-year Treasury yield, are the primary drivers of long-term borrowing costs for consumers.
The 10-year bond yield is elevated compared to levels at the start of this year, and it could remain high as investors grow hesitant to pile into long-term government bonds amid mounting deficits and heavy government borrowing.
"I think there's a global aversion to taking on long-duration. And long-term interest rates are higher across the world," Boockvar said. "So I think those looking to buy a home should not necessarily bet they're going to get rate relief with the cut in short-term interest rates."
2. Fed rate cuts won't fix the supply problem
What's really holding back the market from becoming easier for buyers is supply.
The housing market is in dire need of more homes to help bring prices down. Even if mortgage rates edge lower, hotter demand could send prices higher unless the market gets an increase in available supply, Boockvar said.
"To really be big picture here, you really need baby boomers to downsize. That is where most of the existing home supply needs to come from," he said.
But getting more Americans to move is a challenge. Many homeowners are staying put for two reasons:
Mortgage rates are too high. More than 90% of US homeowners with a mortgage have financed at a rate below 6%, according to a 2023 Redfin analysis.
Home prices are too high. The median existing home price rose to a record $435,300 in June, according to the National Association of Realtors.
But, if home prices were to drop, that would hit homebuilder profits, Boockvar said, suggesting it could potentially limit new housing supply hitting the market.
"It's sort of a catch-22 with this industry right now, that's sort of upside down economically," Boockvar added.
Forecasters generally aren't very optimistic when it comes to the outlook for housing affordability.
Redfin economists expect the median US home sale price to dip 1% by the end of the year, the real estate listings site said in May. Zillow, meanwhile, said in July it expected home values to post a 2% decline by the end of the year.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Hill
14 minutes ago
- The Hill
FTC sues LA Fitness operators for ‘exceedingly difficult' gym cancellation policies
NEW YORK (AP) — The U.S. Federal Trade Commission is suing the operators of LA Fitness, over allegations that they make it 'exceedingly difficult' for consumers to cancel gym memberships and other related services offered in their clubs nationwide. In a Wednesday complaint, the FTC accused Fitness International and its subsidiary Fitness & Sports Clubs of illegally charging consumers 'hundreds of millions of dollars in unwanted recurring fees' as a result of cumbersome cancellation processes. The agency said that tens of thousands of customers have reported difficulties with these policies to date. 'The FTC's complaint describes a scenario that too many Americans have experienced — a gym membership that seems impossible to cancel,' Christopher Mufarrige, director of the agency's Bureau of Consumer Protection, said in a statement. Beyond LA Fitness, California-based Fitness International operates brands like Esporta Fitness, City Sports Club, and Club Studio — spanning across more than 600 locations with over 3.7 million members nationwide. And the FTC pointed to two 'unfair and unlawful' cancellation processes that it says these gyms have used for years: in-person cancellation or cancellation by mail. Both of these options require consumers to print out a form on the gym's website, which includes logging in with credentials that the agency says some customers don't have or remember. And if a customer opts for in-person cancellation, there's limited hours and often difficulty finding a manager to process the forms, the complaint notes — while mailing the form comes with additional costs. 'Each of these cancellation methods is opaque, complicated, and demanding — far from simple,' the FTC writes in its complaint. It also alleges that the company doesn't adequately disclose cancellation offerings when consumers sign up for memberships, and that some will be signed up for additional services with recurring charges without realizing there may be different cancellation requirements. According to the FTC, Fitness International now offers website cancellations for subscriptions 'with stand-alone agreements' — but the agency said the process 'still imposes unnecessary burdens' on customers and claims that that option is buried online. It's also still not possible to cancel memberships on the company's mobile apps, the FTC added. Fitness International did not immediately respond to The Associated Press' request for comment on Wednesday. This isn't the first time that federal regulators have accused gym operators — and other companies with subscription services — of making their cancellation processes too difficult for consumers. Under the Biden administration, the FTC adopted a 'click to cancel' rule, which would have made it easier for consumers to end unwanted subscriptions. But last month, days before that rule was poised to go into effect, a federal appeals court blocked the proposed changes. In its litigation against Fitness International, the FTC says it's seeking a court order prohibiting the allegedly unfair conduct and money back for consumers who were harmed by difficult cancellation processes.
New York Post
14 minutes ago
- New York Post
JD Vance raises $4M for Republican National Committee during UK trip
WASHINGTON — Vice President JD Vance raked in $4 million for the Republican National Committee during his jaunt to the United Kingdom last week, adding more cash to the GOP pot ahead of next year's midterms, The Post has learned. The VP met with several RNC donors living overseas as he traveled across Britain, including stops in the Cotswolds and Scotland, according to a source familiar with the discussions. Federal rules allow Americans living or travelling abroad to contribute to political organizations and campaigns. The UK trip was the latest fundraising sojourn Vance has made since being tapped as RNC finance chair in March. Vice President JD Vance speaks during a meeting with Britain's Foreign Secretary David Lammy at Chevening House in Kent, England, Friday, Aug. 8, 2025. AP The veep previously raised money in Houston, Dallas, Manhattan, Atlanta, Nashville, San Diego, Nantucket, Jackson Hole, and Big Sky, Montana. Vance's first big donor dinner was held in New York City where tickets ran as high as $250,000 per head, The Post previously reported. He then raked in $3 million at his fundraiser in Nantucket last month. Those close to the White House believe Vance's RNC post, an unprecedented position for a vice president to hold, will boost him in his near-certain bid for the GOP presidential nomination in 2028. Trump told reporters Aug. 5 that Vance was the 'most likely' heir to the 45th and 47th president's Make America Great Again movement. U.S. Vice President JD Vance plays golf at Trump Turnberry golf course, during his holiday, in Turnberry, Scotland, Britain, August 14, 2025. REUTERS 'Last year, President Trump won an historic election victory, taking back the White House and helping Republicans regain control of the Senate and retain control of the House,' Vance said in a statement at the time of his appointment. 'But to fully enact the MAGA mandate and President Trump's vision that voters demanded, we must keep and grow our Republican majorities in 2026.' During his visit, Vance also spoke to British officials and successfully convinced the UK to drop its demand to access personal cloud data storage, which could have impacted the privacy of American citizens. On Aug. 8, the 41-year-old went trout fishing with British Foreign Secretary David Lammy in England ahead of a discussion of US-UK relations, Gaza and Ukraine.
15 minutes ago
FTC sues LA Fitness operators for 'exceedingly difficult' gym cancellation policies
NEW YORK -- The U.S. Federal Trade Commission is suing the operators of LA Fitness, over allegations that they make it 'exceedingly difficult' for consumers to cancel gym memberships and other related services offered in their clubs nationwide. In a Wednesday complaint, the FTC accused Fitness International and its subsidiary Fitness & Sports Clubs of illegally charging consumers 'hundreds of millions of dollars in unwanted recurring fees' as a result of cumbersome cancellation processes. The agency said that tens of thousands of customers have reported difficulties with these policies to date. 'The FTC's complaint describes a scenario that too many Americans have experienced — a gym membership that seems impossible to cancel,' Christopher Mufarrige, director of the agency's Bureau of Consumer Protection, said in a statement. Beyond LA Fitness, California-based Fitness International operates brands like Esporta Fitness, City Sports Club, and Club Studio — spanning across more than 600 locations with over 3.7 million members nationwide. And the FTC pointed to two 'unfair and unlawful' cancellation processes that it says these gyms have used for years: in-person cancellation or cancellation by mail. Both of these options require consumers to print out a form on the gym's website, which includes logging in with credentials that the agency says some customers don't have or remember. And if a customer opts for in-person cancellation, there's limited hours and often difficulty finding a manager to process the forms, the complaint notes — while mailing the form comes with additional costs. 'Each of these cancellation methods is opaque, complicated, and demanding — far from simple,' the FTC writes in its complaint. It also alleges that the company doesn't adequately disclose cancellation offerings when consumers sign up for memberships, and that some will be signed up for additional services with recurring charges without realizing there may be different cancellation requirements. According to the FTC, Fitness International now offers website cancellations for subscriptions 'with stand-alone agreements' — but the agency said the process 'still imposes unnecessary burdens' on customers and claims that that option is buried online. It's also still not possible to cancel memberships on the company's mobile apps, the FTC added. Fitness International did not immediately respond to The Associated Press' request for comment on Wednesday. This isn't the first time that federal regulators have accused gym operators — and other companies with subscription services — of making their cancellation processes too difficult for consumers. Under the Biden administration, the FTC adopted a 'click to cancel' rule, which would have made it easier for consumers to end unwanted subscriptions. But last month, days before that rule was poised to go into effect, a federal appeals court blocked the proposed changes.
