NextFin news, On November 8, 2025, US Treasury Secretary Scott Bessent publicly acknowledged that sectors of the US economy, with housing at the forefront, are currently experiencing recessionary conditions. Speaking in Washington D.C., Bessent noted that while the broader economy is undergoing a period of transition largely due to government spending cuts aimed at deficit reduction, the housing sector remains particularly fragile. He asserted that an interest rate cut by the Federal Reserve could catalyze the end of this housing recession, signaling a key monetary policy lever to stimulate market recovery.
Bessent’s remarks come amid persistent high mortgage rates which have dampened demand for home purchases and slowed property price growth. Mortgage rates had briefly touched a 2025 low of 6.12% at the end of October but rebounded soon afterwards following signals from Fed Chair Jerome Powell that rate cuts are not guaranteed soon. Bessent’s call for Fed intervention highlights the expectation that monetary easing will lower financing costs and revive buyer activity struggling under elevated borrowing expenses.
The context of Bessent’s comments is deeply rooted in the current economic landscape under President Donald Trump’s administration, inaugurated January 2025, where aggressive tariff impositions and federal spending cuts have contributed to economic uncertainty. Treasury Department Counselor Joseph LaVorgna further supported the analysis by explicating how the Fed’s accommodative monetary policy could be pivotal in reversing the housing sector’s downturn.
Analyzing the causes behind the housing recession reveals a confluence of factors: historically high interest rates set by the Federal Reserve since mid-2024 to curb inflation have increased mortgage costs, reducing affordability. Concurrently, fiscal consolidation has reined in government stimulus previously supporting economic growth. The Trump administration's tariffs have added inflationary pressures, indirectly influencing the cost of homebuilding materials thus constraining supply despite reduced demand.
This combination has led to a significant slowdown in housing market activity. In the third quarter of 2025, new home sales declined approximately 15% year-over-year, according to industry data, while existing home sales contracted by nearly 10%. Mortgage originations dropped by 12% compared to early 2025 levels, signaling a tightened lending environment. This downturn has reverberated across related sectors, including construction employment, which fell by 4% nationally.
From a market impact perspective, prolonged weakness in housing restrains overall economic growth given the sector’s substantial contribution to GDP—roughly 15% when accounting for residential investment and related services. Additionally, consumer sentiment tends to align closely with housing market health, affecting spending in durable goods and personal expenditures. Limited housing activity also constrains wealth accumulation for households dependent on property value appreciation, affecting broader financial stability.
Looking forward, Bessent’s emphasis on a Fed rate cut as a potential turning point implies that investors and policymakers are closely monitoring forthcoming Federal Open Market Committee (FOMC) decisions. Should the Fed reduce rates in the near term, mortgage rates could decline by 50-100 basis points within subsequent quarters, restoring some affordability and reigniting demand. This scenario may align with moderating inflation trends and data-driven Fed risk tolerance adjustments.
However, risks persist. A premature or insufficient Fed easing may fail to sustain housing recovery amidst lingering fiscal drag and potential geopolitical uncertainties impacting trade and material supply chains. Conversely, an aggressive easing without inflation control could destabilize financial markets. The Trump administration’s strategic positioning, which shifts some blame for economic challenges onto the Fed, suggests political sensitivity to forthcoming economic indicators and policy moves.
In summary, Secretary Bessent’s declaration underscores the critical dependence of the housing market’s recovery on accommodative monetary policy after a tight fiscal environment and trade disruptions. Detailed macroeconomic modeling suggests that an interest rate cut could reverse negative growth in housing starts and sales within 2-4 quarters, supporting broader economic expansion. Stakeholders in real estate, banking, and construction sectors should thus prepare for increased volatility around Fed announcements and policy shifts in late 2025 and early 2026.
According to Yahoo Finance UK’s report, Bessent’s comments have already influenced market expectations, generating positive sentiment among mortgage lenders and homebuilders, hinting at potential policy-driven stabilization after months of softness. This development highlights the enduring sensitivity of the housing sector to Federal Reserve monetary stance and its pivotal role in the broader US economic trajectory.
