Trump vs. Powell Round 2: What It Means for Mortgage Rates

I know you guys missed me. I know you definitely noticed we didn’t have our usual pre-Happy Hour peptalk the last two weeks. I know, I know, I know. I’ve been busy but so have the news cycles and no joke, so has the real estate market. So let’s catch up

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Before you dive into this week’s blog, you’re going to want to catch up on episode one of the Real Housewives of Central Bank – my blog post from June 20. That was the last time Trump got on the horn about firing Powell, June Fed Week. He’s back at it this week, accusing Powell of fraud to lawmakers and then casually walking it back the next day. The only problem is the mere suggestion of firing the Fed Chair caused stock market volatility, a dip in the value of the US dollar and higher treasury yields (read: mortgage rates jumped in response). 

Responses also came from Wall Street leaders like Jamie Dimon and David Solomon. They were adamant that Trump firing Powell would spark inflation and destabilize markets. Now we’ve considered that a significant component of Trump’s strategy across the board is destabilization. On the other hand, investors hate political meddling with monetary policy and both financial and political elites seem to consider Fed independence a pretty real line in the sand. My goal with today’s blog is not to justify or debate Trump’s tactics but rather to help you consider the realized and potential impacts of them. 

Powell probably stays. 

That’s the reality until May of 2026, when his term ends. Even his potential replacement, Kevin Warsh, told CNBC yesterday that the Fed’s independence from political influence is essential in preserving confidence in the nation’s monetary system. So this tells us, we will likely continue to see steady Fed policy in response to growing inflation concerns. Meaning just the two rate cuts we’ve been promised so far this year. 

Reminder: Fed rate cuts are not the only driver of mortgage interest rates. 

That being said, they do drive market sentiment which heavily impacts real estate demand. Take this current buyer’s market as the perfect example. It’s really rooted in a moment of pause, a slight hesitation from buyers and sellers across the country. It could end at any moment, closing a window of opportunity for buyers. Two weeks ago, interest rates improved an eighth of a point. The following week we saw mortgage applications jump in a big way. 

So imagine what a Fed rate cut does to buyer activity? Considering 90% of Americans think the Fed Funds rate is the direct equivalent to mortgage rates. 

Future Fed Policy 

An especially important piece of Warshs’ CNBC interview was focused on a more holistic framework for Fed policy. He discussed rate cuts but also the balance sheet and how cutting both simultaneously would best stimulate the economy. Personally, because I know you’re looking for my expert opinion here, I think that reducing the Fed’s 6.7 trillion balance sheet will have a very real impact on mortgage rates. Warsh also wants to revive the pact between the Fed and the Treasury to coordinate the asset runoff. When I said the balance sheet impacts rates, I didn’t say it would bring them down. The runoff could very well flood the bond market, creating a supply problem that drives rates up.  

Forecasting Rates = Shitty Strategy 

You know how I feel about trying to catch falling knives. 

(That’s how I refer to trying to time interest rates and the market.)

My advice is not to wait for the magical, possibly mythical Fed Rate Cut. I believe buyers and sellers strategy should be to plan for volatility. For sellers this means awareness. Awareness that your buyer pool is jittery but still active. I’d recommend: 

1. Pre-listing inspections so you can address any issues prior to being in escrow. Think of it like this, buyers feel like they are purchasing the one designer bag they’ve always dreamed of when they go into escrow on your house. It’s expensive but it’s their dream. That’s why they don’t want to buy one with scuffs all over it.  

2. Don’t test the market. I’ve talked about this before. Price competitively and you might actually get more. Be open to concessions, otherwise you’ll be broadcasting price reductions. 

3. Ask your agent if their preferred lender has list of buyers preapproved in your price range. I do and I reach out to these buyers when my preferred partners ask me! 

In other news, I just came back from the Forward Event, and I am full of inspiration and tactics I would love to share with the entrepreneurs, realtors, and marketing folks out there. Let me know if you want to get together and go over my notes. My favorites were on scaling by making the right hires, using AI correctly in your content creation system and building real confidence. I’m happy to share what I learned.