The Fed Just Ignited The Housing Market – What It Means for You

The Federal Reserve Bank is trying to jumpstart the housing market. So if you're thinking about buying a house, selling a house, or you're paying down a mortgage, you need to watch this video. Earlier in 2025, Warren Buffett's company sounded the alarm on the housing market. Why? Because they said that the trifecta of the right house at the right price at the right mortgage rate was not going to be possible for most buyers. Well now, some of this might be changing because the Federal Reserve Bank just cut interest rates and now they're saying prepare for even lower interest rates coming. That's why in this video, I want to discuss Warren Buffett's concerns about the housing market and how the Fed's decision is going to impact the housing market later on in 2025 and in 2026. Warren Buffett said that the housing market is under stress because of the high home prices, the high mortgage rates, and the incomes that have not kept up. Over just the last five years, we've seen home prices grow by around 50%. We have seen mortgage rates go from around and then we've seen wages in the United States grow by around 20%. Here's why this matters. For the purposes of this example, I'm going to keep the numbers nice and round. Let's assume that you're making $10,000 a month after taxes, so $120,000 a year in 2020, and you wanted to buy this half a million dollar house. Well, if you put 20% down, that would be $100,000. You would finance the other $400,000 and you could get a mortgage rate at around 2.8% back in the year 2020, which means your monthly mortgage payment would be $1,650 a month. But the real catch here is that this monthly payment was about 14% of your take-home income. So you were taking 14% of the money you're making and spending that on your mortgage. Let's compare that to 2025, what we're seeing today. Well, we can just look at the standard growth. We have seen incomes in America rise by around 20%. Some people more, some people less, but the average median income has grown by around 20% of the United States, which means if you're making $10,000 a month, now you're making $12,000 a month, which is $144,000 a year. Again, we're assuming after tax just for the purposes of this video and house prices have grown by around 50%. So this $500,000 house now costs $750,000. Before you put down $100,000 as the down payment, now you're going to put down $150,000 as the down payment. You're going to finance $600,000, not at 2.8%. Now you might be getting a mortgage, let's just say 6.5%. Well, now that you're paying 6.5% on this mortgage, you're borrowing more dollars at a higher interest rate. So your mortgage payment on this exact same house has gone up to around $3,800 a month, which is clearly a lot more than this. I mean, mortgage payments have now more than doubled on that exact same house. But here's the real catch, because now you are spending about 32% of your take-home income on that exact same house. This is the reason why housing has become so much more unaffordable, because you have to spend so much more of your money to afford the same house as before. Not to mention the fact that because your house is more expensive, your insurance is going to cost you more money, and your property taxes are also going to be higher because now you're paying property taxes on a 50% more valuable house. Now, not surprisingly, this created a problem. That's what Warren Buffett was alluding to, which I'm going to highlight in just a second. But I want to remind you that for those of you that are investors or want to become investors, I've put together a brand new free investing masterclass, where I'll walk you through how you can find hidden investment opportunities before everybody else. And I'll show you the same system that my firm and I use to find investment opportunities before they hit the mainstream. It's a completely free masterclass. There's a ton of value in there. So if you want to watch that masterclass, I have the link for you down in the description below. And when you sign up for the masterclass, you will also get, as a complimentary bonus, access to market briefs, which is my newsletter for investors, also for free. So this problem of houses becoming unaffordable led to the lowest number of house sales that we have seen in about 30 years. Now, you'd probably think that if people aren't buying houses, the home prices would be falling down. Well, not exactly. If you're a homeowner, you will raise the price of your home much faster than you will cut the price of your home. For example, if you list this house on sale for $750,000 and somebody offers you a million dollars, well, you probably will take it. You're not going to say, oh, no, let me see if somebody wants to offer me less money. You're going to take the more money. But if you list this house for $750,000 and somebody gives you a $600,000 offer, well, now you're going to say, let's take a pause. Let's see if we get any more offers. I don't want to cut the price of my house. Let's see what happens. And so homeowners who are not desperate are much more likely to sit on their houses as opposed to cutting the prices of their houses as fast as they would raise the price of their houses, because if you're getting more money, you're going to sell it for more money. If you're getting less money, you're going to wait and see to see if you can get more money. But the part that I'm going to highlight one more time is that when wages are growing at a rate that is significantly lower than this, making housing so unaffordable, that's when you can start to have problems. And there are ultimately three things that can happen to make housing more affordable. Number one is that wages could go up and housing prices stay the same. If housing prices stay the same, if people start making more money, well, now housing starts to become more affordable. Number two, as a house prices drop, this $750,000 house now costs $650,000 or $550,000. But there's a cost and consequence to that. The cost and consequence is, of course, negative equity. People could be sitting underwater on their houses, and we have seen the negative impacts of that on the economy before. It can cause more foreclosures, more bankruptcies, and put the United States into a recession. And right now, at the time I'm recording this video, we are starting to see more sellers in the United States start to cut the prices of their houses because sellers have been sitting on their houses, not getting as many buyers as they would have thought. But before we jump to any conclusions, you also have to take a look at number three, which are mortgage rates falling. If you can get a lower mortgage rate while house prices stay the same, well, then housing becomes more affordable because you can borrow the money to buy that house at a lower interest rate. Now, sure, if you're buying the house all cash, it doesn't make any difference. But for most people who buy a house with a mortgage, a lower mortgage rate means that the But that only works if home prices don't start going back up. And this is where the Federal Reserve Bank has been under a lot of pressure by the president, by the National Association of Realtors, by the Mortgage Bankers Association to cut interest rates. That way, banks can start offering lower mortgage rates again. And this is now what we're starting to see happen because the Federal Reserve Bank just cut interest rates for the first time in 2025 in September. Now, for full transparency, the Federal Reserve Bank doesn't dictate your mortgage rate. So when the Fed cuts interest rates, that doesn't directly mean that your mortgage rate is going to fall. When the Fed cut interest rates, what that means is that banks are going to pay a lower interest rate when they borrow money from another bank. But it gives banks more breathing room to lower their interest rates. To really understand where interest rates are going to go, this is going to get a little bit technical. You want to pay attention to the 10-year treasury yield. The 10-year treasury is when you lend money to the United States government for 10 years, what interest rate you would get. And the reason why you want to pay attention to that is because when your bank is deciding where they want to invest their money, whether it's going to be a loan to you, a loan to your bro-cousin Bundy, or a loan to the United States government, they're going to take a look at risk versus reward. And the United States government is a low-risk investment because they always pay the bills. Why? Because they have the ability to print money from the Federal Reserve Bank. So they can always pay back their debt versus you don't. So they're going to charge you a higher interest rate than they can get from the United States government. So if you really want to get an idea of where mortgage rates are going, you want to take a look at this 10-year yield because if the 10-year yield falls, then your bank can also charge you a lower interest rate. But here's the catch. Here's where it all ties in together. When the Federal Reserve Bank cuts interest rates, generally, that gives more ability for the 10-year yield to fall. Now, the 10-year yield is going to depend on a lot of economic factors, on how people are confident in the United States dollar and the economy and all these other things. But if the Fed cut interest rates, that can give breathing room to the 10-year yield, which can then give breathing room for your bank to also lower mortgage rates. But this is where things can get very interesting, especially in 2026, because many companies, for example, Home Depot and Lowe's have been begging the Federal Reserve Bank to start cutting interest rates. Why? Because if home prices start going up again with lower mortgage rates, then not only will you see people buy houses, but you'll have people that are sitting on houses with some more equity. And what do people like to do with that equity? They like to pull that cash out through a cash out refinance. And it's easier to do that when you have a lower mortgage rate. And now when you pull that cash out with a cash out refinance, now you go to Home Depot with the new money or you go to Lowe's and you buy some stuff to finish your basement or to redo your kitchen or redo your bathroom. And Home Depot and Lowe's and many other companies have been saying people have been putting off these projects because they've been waiting for these lower interest rates. So it'll be interesting to see because we know that President Trump has been demanding lower interest rates. He wants to see lower mortgage rates. Yeah, if those lower mortgage rates come in, it can make your mortgage payment a little bit cheaper, at least in the short term. But if house prices go up, well, that could create a new problem because now you have to borrow more dollars. But you also have to combine that by looking at wages, because if the economy starts to grow even faster, we could see wages start to grow faster. And so the question is, which one of these are going to be growing the fastest? If mortgage rates are falling, wages are rising, and the wages are rising faster than home prices, maybe housing can become more affordable. If wages rise slower than house prices, well, you can imagine the housing would be less affordable. That's why it is a balancing act. And you want to pay attention to each one of these. So we know that the Fed wants to cut interest rates more in 2025, and they want to cut interest rates more in 2026. And that's what the president wants as well. But when it comes to housing prices, you have to look at supply and demand. Those are the two factors that will ultimately decide where housing prices go. What factors influence supply? Well, that could be how many people are selling the house, how many houses are being built, because those can impact house prices and everything else. But then when it comes to demand, now you have to look at the economy, how much money are people making? Do they feel strong in the economy? And you also have to take a look at mortgage rates, because that can impact the affordability of a house. And when mortgage rates go down, generally, more people want to buy a house. So it's not a very simple linear thing that you can just predict. There's a lot of factors that go into it. But this is something you want to pay attention to, because if and when we continue to see lower interest rates, you bet that one of the first industries to be affected is going to be the housing market, because more people may want to buy a house, more people may want to get a mortgage, more people may want to refinance, and that can impact many different parts of the economy. And this is where, again, some people are going to become wealthier, while the average person will get left behind. And this is why it is so important, number one, for you to understand what's happening, but then number two, for you to become an investor, that we can capitalize on the way our economic system works. I'm not saying we're not going to see a recession or a market crash. These things will happen. Nobody knows when, but the way that you can build wealth over the long term is by becoming an investor. And again, if you want more resources, I have a free investing masterclass that you can watch that'll walk you through how you can build an investing system and find investment opportunities that maybe a lot of people are overlooking. I have that link for you down in the description. And if you enjoy this video, the best thank you is to share this video with a friend, a colleague, a family member, or a fellow investor. In the early 1970s, the United States government had borrowed so much money, President Richard Nixon severed the tie between the United States dollar and physical gold. I have directed Secretary Connolly to suspend temporarily the convertibility of the dollar into gold. Now, if you notice what he said, he said this was temporary. And here we are 54 years later, and the dollar is still...