New: 🧠 Market Minds Issue #119

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You felt it before he said it. The 30-year fixed is hovering around 6.25%. Refi apps are up 132% year over year. Monthly payments dropped 7.5% in December. Inventory is up 9% from a year ago. The market is thawing, not booming, not euphoric, but thawing.

And yet, in the State of the Union, housing was a cameo.

One mention of mortgage rates. No roadmap on affordability. No supply-side blueprint. No signal flare for 2026. Just a promise that “low interest rates will solve the Biden-created housing problem” while preserving home values.

You and I both know rates don’t “solve” housing. They stimulate transactions. They don’t create inventory. They don’t reform zoning. They don’t magically compress construction timelines.

The real takeaway: the White House is betting on financial engineering over structural reform.

And that should shape how you think about the next 12–24 months.

In January, the administration directed Fannie Mae and Freddie Mac to purchase $200 billion in mortgage-backed securities.

That’s not rhetoric. That’s intervention.

It tells you three things:

This is a subtle but powerful message to capital markets: housing will be supported.

Refis are already exploding. That liquidity injection matters. Every refinance is effectively a consumer stimulus check. Thousands per year in household cash flow. That money doesn’t sit idle, it gets spent, invested, or used to delever.

But here’s the nuance: falling rates primarily help existing owners. They don’t fix affordability for first-time buyers facing elevated price-to-income ratios. They don’t solve starter-home scarcity.

Which means transaction volume may recover faster than affordability.

And volume is what pays you.

The President renewed calls to permanently restrict institutional investors from buying single-family homes, framing them as villains outbidding families.

The data: institutional buyers account for roughly 2% of total home sales.

That’s not nothing. But it’s also not the boogeyman.

The signal here isn’t market-moving. It’s voter-facing.

Large-scale SFR operators won’t disappear. Capital adapts. If anything, regulatory friction can increase barriers to entry, which historically benefits well-capitalized incumbents.

The bigger risk? If restrictions expand beyond headline rhetoric into financing constraints or tax penalties, you could see localized distortions in Sun Belt rental-heavy markets.

But right now, it’s messaging, not a structural reset of the single-family rental thesis.

This is where things get interesting.

The Supreme Court struck down last year’s sweeping tariffs on imported materials, including steel, lumber, and aluminum. A prior estimate pegged the added cost to build a new home at $17,500 due to tariff policies.

That’s not abstract. That’s margin.

Builders fought for exemptions. Some won. But cost uncertainty froze pricing discipline in many markets. The Court’s ruling should have provided clarity, but the President called it “unfortunate” and signaled continued pursuit.

Translation: input volatility remains a risk.

For you, that means:

• New construction margins remain politically exposed
• Smaller builders with thinner balance sheets stay vulnerable
• Build-to-rent economics hinge on material stability

Watch this carefully. If tariffs resurface aggressively, the supply pipeline tightens again. And when supply tightens in a falling-rate environment, price pressure returns.

That’s the kind of asymmetry you want to be positioned for, not reacting to.

Housing may have been sidelined in the speech, but legislation is quietly advancing.

The Senate’s ROAD to Housing Act. The House’s Housing for the 21st Century Act. The proposed Neighborhood Homes Investment Act.

These focus on tax credits, affordable development incentives, and starter-home rehabilitation.

Nothing revolutionary. But incremental policy stacked over time compounds.

If even portions pass, the biggest beneficiaries won’t be Wall Street. They’ll be operators who understand local execution, infill development, value-add renovation, entry-level inventory.

You.

The speech told you what wasn’t said.

Instead: protect home values, nudge rates lower, restrict politically unpopular buyers, and let the market do the rest.

The administration isn’t trying to reset housing. It’s trying to stabilize it.

That means:

The opportunity isn’t in waiting for Washington to fix housing.

It’s in recognizing that housing is too systemically important to be allowed to fail and positioning yourself accordingly.

Housing wasn’t the headline.

But the silence? That was the signal.

Mortgage rates have fallen to 6.01%, the lowest level in over three years. The median monthly payment is down 2.6% year over year to $2,599. Wages are up nearly 4%. Buyers have regained roughly $34,000 in purchasing power compared to when rates hovered near 6.9%.

On paper, this is the long-awaited release valve. In practice, it hasn’t translated into urgency. Pending sales are down 5.5% year over year, the sharpest decline in over a year. The Redfin Homebuyer Demand Index is off 15% annually. Google searches for “homes for sale” are softer month over month. Mortgage purchase applications dipped 5% week over week.

The payment has improved. The psychology hasn’t. Lower rates reduce friction, but they don’t eliminate fear. Economic uncertainty, layoff anxiety, and volatile equity markets are dulling the traditional rate-response reflex. This is what a cautious buyer looks like: mathematically better off, emotionally unconvinced.

Median sale prices are still up 1% year over year. Asking prices are up 3.5%. That spread matters. Sellers have not capitulated. They’ve moderated.

New listings are down 2.8%. Active listings are down 1.8%, the largest decline since late 2023. Months of supply sits at 5.1, technically “balanced,” but behaviorally bifurcated. Move-in ready homes in desirable neighborhoods are drawing competition. Everything else is aging.

Homes are taking 67 days to sell, the longest median in nearly seven years. The share selling above list price has fallen to 19.9%. The sale-to-list ratio is 97.9%, down from 98% last year. These are small shifts, but they point in one direction: pricing power is no longer assumed. It is earned.

The market is no longer broadly tight. It is selectively tight. Condition, location, and presentation are doing the heavy lifting that liquidity once handled.

There’s no flood of inventory coming to rescue buyers. New listings remain muted, and active inventory is contracting modestly. The “lock-in effect” hasn’t disappeared simply because rates have dipped below 6.5%. A homeowner with a 3% mortgage is not mobilized by 6%.

At the metro level, divergence is widening. San Francisco, Newark, Milwaukee, Warren, and Philadelphia are seeing meaningful price appreciation. Meanwhile, Oakland, West Palm Beach, Dallas, Sacramento, and Boston are posting price declines. Pending sales are falling sharply in markets like Oakland, Houston, Nassau County, and Nashville, while a handful of Midwest and Florida metros are still seeing modest gains.

This isn’t a national story. It’s a mosaic. The Sun Belt excesses are normalizing. Select coastal and Midwest markets are quietly firming. Capital is discriminating again.

Touring activity is up 17% since the start of the year, roughly in line with last year’s seasonal ramp. That’s not apathy. It’s reconnaissance.

Thirty-one percent of homes go under contract within two weeks, down from 32% last year but hardly distressed. Buyers are watching, waiting, comparing. They’re not gone. They’re deliberate.

What’s changed is velocity. In 2021, the market pulled demand forward. Today, it stretches demand out. The spring season may bring incremental reacceleration, especially among affluent buyers with stable employment and equity exposure. But the days of rate drops triggering bidding wars overnight are behind us, at least for now.

The most important shift isn’t in the payment. It’s in expectations.

For two years, buyers were told: wait for rates to fall. Rates have fallen. The sidelines remain crowded. That tells you something. The housing market is no longer constrained solely by cost of capital. It is constrained by confidence.

At the same time, sellers are absorbing a new reality. Days on market are longer. Over-ask premiums are thinner. List-to-sale discounts are widening at the margins. The repricing is subtle, but it’s happening in time, not necessarily in dramatic price cuts.

The narrative of “higher for longer” is giving way to something more nuanced: stable but selective. Affordability is improving. Activity is uneven. Inventory is contained. Risk is being reassessed in real time.

You’re not operating in a frozen market. You’re operating in a filtering one. The capital is there. The buyers are there. The sellers are there. What’s missing is indiscriminate enthusiasm.

That’s not a crisis. It’s a reset. And resets reward discipline

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A move into the 5s is not dramatic in isolation. It doesn’t reset affordability to 2021, and it doesn’t erase the lock-in effect. But it does something more important: it changes posture.

When rates ease even modestly heading into spring, buyers who had mentally archived their search reopen the spreadsheet. Sellers who felt pinned by their current mortgage begin wondering whether mobility is back on the table. In markets starved of volume, that shift in posture matters more than the percentage point itself.

The key isn’t broadcasting the update. It’s recognizing that small financial changes can unlock disproportionate psychological movement.

Curiosity, not conviction, is what drives the next 30 days.

After two years of volatility, most serious buyers are not uninformed. They’re fatigued. They’ve watched payments climb, recalculated, paused, and repeated the cycle. A dip into the 5s doesn’t automatically make homes affordable; it makes the conversation rational again.

When someone re-runs their payment at 5.99% instead of 6.75%, two things happen. First, the difference is either meaningful enough to act on or small enough to clarify that waiting won’t materially improve the picture. Both outcomes are productive. Second, the abstract “market” becomes personal math again.

That shift, from headlines to household numbers, is where transactions are born.

Early spring often compresses timelines. If even a fraction of sidelined demand steps forward while inventory remains measured, days on market tighten quickly. Momentum builds before it’s obvious. The first few weeks after a rate dip often carry more leverage than the next few months.

This is less about persuading someone to buy and more about offering to quantify their options. Clarity reduces hesitation. Reduced hesitation creates motion.

Seller psychology tends to lag buyer psychology. Buyers react to affordability first. Sellers react once they believe their next move is possible.

That lag creates asymmetry.

A homeowner who already knows what they want next holds a narrow advantage in this environment. Listing into strengthening demand—before competing supply reappears—can mean tighter timelines and firmer negotiations. At the same time, purchasing before prices fully reflect renewed demand can soften the trade-up spread.

The window is rarely long. As rates stabilize, listings follow. Competition normalizes. The opportunity isn’t theoretical; it’s temporal.

There’s another layer beneath this. Many homeowners are anchored to ultra-low mortgages. They won’t move simply because rates dipped. They move when the path forward feels concrete. Showing them what’s actually available—before discussing a sale—shifts the conversation from fear of loss to possibility of gain.

That sequencing alters outcomes.

Transaction counts over the past two years have been constrained. In low-volume markets, share shifts quickly when behavior changes.

A rate in the 5s is not a cycle-defining event. It’s a stress test. It reveals who is prepared to convert tentative interest into structured dialogue while others are still waiting for something more dramatic.

You don’t need a full percentage-point swing to change a quarter. You need a handful of well-timed, high-quality conversations while the market recalibrates.

Small rate drops don’t unlock the market all at once. They reward those who recognize that momentum begins quietly, long before it becomes consensus.

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Power is choosing the lever everyone else ignores.

In January, the administration directed Fannie Mae and Freddie Mac to purchase $200 billion in mortgage-backed securities.

Instead of chasing zoning reform or sweeping affordability mandates, it leaned into the GSE balance sheet to press rates lower and signal that housing values remain politically untouchable.

No speechmaking. Just support where it counts.

Rates are drifting lower, but Washington isn’t leading the housing recovery — capital markets are. The administration is signaling support through balance sheet mechanics, not structural reform, which means prices remain protected while affordability improves only at the margins. At the same time, buyers aren’t reacting to better math with urgency; confidence, not cost of capital, is the constraint. A move into the 5s doesn’t reset the cycle — it quietly shifts posture. The market isn’t frozen or booming. It’s filtering. Liquidity is returning selectively, policy risk remains episodic, and volume will be captured by those who recognize that momentum in 2026 begins subtly, not spectacularly.

Have a great weekend - we’ll see you next Saturday.

Cheers 🍻

-Market Minds Team

The content of Market Minds is provided for informational purposes only and reflects personal opinions based on sources believed to be reliable. It does not constitute financial, investment, legal, or professional advice. Each reader is solely responsible for their own decisions.