The U.S. housing market may already be operating in recession-like conditions due to persistently high interest rates, according to Treasury Secretary Scott Bessent, who is urging the Federal Reserve to accelerate the pace of rate cuts.
Bessent said the broader economy remains stable, but elevated borrowing costs are weighing heavily on real-estate activity and slowing momentum in housing. He emphasized that the strain is most acute for lower-income consumers and debt-burdened households, who face the greatest affordability challenges under current mortgage conditions.
Key takeaways
• Treasury Secretary Scott Bessent says parts of the U.S. economy, especially housing, may already be in recession
• Elevated mortgage rates continue to suppress housing demand and activity
• Low-income households and first-time buyers are feeling the greatest strain
• Bessent and some Fed officials are urging faster interest-rate cuts to avoid deeper slowdown
• Pending home sales were flat in September, signaling ongoing weakness in housing
Housing activity stagnates as borrowing costs remain elevated
Mortgage rates have stayed high despite recent central-bank easing, creating persistent affordability barriers. Pending home sales were flat in September, according to the National Association of Realtors, underscoring limited buyer capacity and a continued pause across much of the residential market.
Housing demand has shown muted movement through the second half of the year, with activity clustering around cash buyers and higher-income households able to absorb financing costs.
Fed officials divided on pace of interest-rate cuts
The Federal Reserve most recently cut interest rates by 25 basis points, but internal debate continues over whether larger or faster reductions are warranted.
Federal Reserve Governor Stephen Miran has warned that keeping rates elevated for too long could risk tipping the broader economy into recession. Miran, currently on leave as chair of the White House Council of Economic Advisers, supported a 50-basis-point cut at the last policy meeting.
Administration calls for faster easing
Bessent reiterated that the administration has reduced federal spending, contributing to a decline in the deficit-to-GDP ratio from 6.4 percent to 5.9 percent. He has argued that easing inflation and fiscal tightening should give the Fed room to cut interest rates more aggressively.
According to Bessent, a quicker shift to lower borrowing costs could help relieve pressure on housing affordability and support consumer demand.
What this means for housing and rental markets
Persistent financing constraints and elevated mortgage rates have:
- Limited purchasing power for first-time buyers
- Increased reliance on rental housing, particularly single-family units
- Slowed transaction volume and new-construction activity
- Concentrated market activity among higher-income and cash buyers
If rates stay elevated for an extended period, rental demand may strengthen further, while for-sale housing could see continued stagnation through 2026.
Source: Reuters
