QUESTION: My realtor says the Fed is keeping rates high until the November midterms to punish Trump. He insists inflation has subsided and expects another rate cut to bring mortgage rates down and buyers back. He claims I will have better luck listing the property after midterms. Is there any substance to this argument?
ANSWER: No. Your realtor is asking you to stake a financial decision on his political opinion. Where is his evidence that the Fed is setting rates to punish Trump? The Fed makes monetary policy independently of the White House. You can criticize its decisions without inventing motives. Someone advising you on the sale of your home should understand the financing market well enough to explain why buyers are struggling, instead of blaming everything on a personal vendetta.
Investors consider the future course of inflation, economic growth, interest rates, and the supply of competing investments. The Fed controls an overnight policy rate. A 30-year mortgage must attract money from investors who have other places to put it. They are concerned with what their return will buy and whether another investment offers better compensation. Your realtor cannot make that calculation disappear by circling the next Fed meeting on a calendar.
Treasury debt competes for that same capital. When the government borrows, investors must absorb the securities it issues, and the yield required depends on demand. Mortgage securities must remain competitive with those alternatives. The 10-year Treasury is an important benchmark, but mortgage rates also carry a spread reflecting repayment uncertainty, market volatility, and the costs of making and servicing loans. That spread can widen enough to offset a decline in Treasury yields. There is no rule requiring a lender to pass through a Fed cut point for point.
The borrower also holds an option that costs the investor money. When rates fall, homeowners refinance and repay mortgages that investors would prefer to keep. When rates rise, homeowners hold on to their cheap loans, extending the investor’s exposure to an unattractive yield. Investors demand compensation for that arrangement. Greater uncertainty about interest rates can increase the compensation they require.
Even cutting the federal funds target to zero would not guarantee a return to pandemic mortgage rates. Markets would ask why the Fed had taken such an extraordinary step. If it signaled a severe economic contraction, long-term yields might decline, but lending could tighten and buyers could fear for their jobs. If investors believed the Fed had abandoned inflation discipline, longer-term yields could rise. The Fed cannot order capital to accept a return investors consider inadequate.
People also keep confusing lower inflation with lower prices. The price increases accumulated since 2020 remain embedded in household budgets. Overall U.S. consumer prices are up about 29.9% from January 2020 through August 2026. That calculation uses the BLS index’s rise from 257.971 to 334.980. Slower inflation does not restore the purchasing power already lost, and it does not reverse the increase in the income required to support the same standard of living.
Housing carries an even larger accumulated increase. The national Case-Shiller index was roughly 59% above January 2020 by July 2026. Buyers are therefore confronting a much higher purchase price alongside more expensive financing. A quarter-point reduction in the overnight rate cannot repair that arithmetic. Sellers may remember what somebody paid during the frenzy, but the next buyer must qualify against today’s payment and today’s income.
My view is that exceptionally cheap money persisted far too long and distorted expectations. The 30-year mortgage average reached 2.65% in January 2021. That year, the Fed added $80 billion in Treasuries and $40 billion in agency mortgage-backed securities to its holdings each month. Direct purchases of mortgage securities supported financing conditions in a way that an ordinary policy-rate cut does not replicate. People took an extraordinary intervention and assumed it established the normal cost of borrowing forever.
That left us with two real estate economies. Existing owners with cheap fixed mortgages possess a financing advantage that a new buyer cannot obtain merely by purchasing their house. Those owners may have considerable equity and little incentive to move, because moving means surrendering the old loan. New buyers must finance elevated prices at current rates. Cash buyers operate under another set of constraints altogether. Talking about “the housing market” as though everyone faces the same circumstances conceals the problem. The low-rate mortgage has become an asset worth holding on to.
Weak employment makes the situation harder. A buyer concerned about losing income will not necessarily take on a large mortgage because rates decline modestly. Lower borrowing costs cannot substitute for a dependable paycheck, and falling rates during a downturn need not produce rising sales. When homes sit longer, sellers have to assess actual buyer demand and competing inventory. Sometimes the adjustment has to come through the asking price. Expecting cheaper credit to rescue every valuation is precisely how people avoid confronting what the market is telling them.
Buyers who need to purchase now must qualify at the financing terms available now, negotiate a price they can support, or choose a less expensive property. Sellers should not base their decisions on another 2% or 3% mortgage boom because, sorry, that was a once-in-a-lifetime event. Nobody can prove those rates will never appear again, but another emergency producing them would not necessarily reproduce the pandemic buying frenzy. Your realtor sounds like an idiot. You are paying the carrying costs while he waits for Washington to deliver the market he would prefer.