The Fed Will Print Trillions — What That Means for Home Prices

Home Prices: Declines and Gains Across Metro Areas [00:16]

• Over the past 12 months, home prices have fallen in various metro areas, with darker red bubbles on a map indicating more significant declines.
• These declining areas are predominantly located in the South, specifically Florida, and on the West Coast.
• Conversely, metro areas where home prices have risen over the same period are indicated by darker blue bubbles, with the scale shown in the top left.
• The heaviest concentrations of price increases are observed in the Midwest and Northeast regions.
• Out of the largest 300 metro areas in the US, home prices have increased in 195 markets and decreased in 105.
• On a national average, home prices are up by 1.7% over the past 12 months, though local variations can be substantial.

  "If the bubble is a darker red, that means that home prices have fallen more in that metro area."

Mortgage Interest Rates and Federal Reserve Influence [01:53]

• Mortgage interest rates have been on a downward trend, currently hovering near 6% for a 30-year fixed mortgage.
• This is a significant improvement from the highs near 8% seen in late 2023, though still higher than the sub-3% rates from three to four years ago.
• The decline in mortgage rates is attributed to the Federal Reserve cutting its Fed funds rates and inflation not being "raging hot."
• It's important to note that the Federal Reserve does not directly control mortgage interest rates.
• Mortgage rates are correlated with interest rates on 10-year government debts. When the Fed cuts short-term rates, it has a moderate effect on lowering mortgage rates.
• The speaker anticipates the Federal Reserve will end its monetary tightening cycle soon, potentially this month, and begin quantitative easing in 2026.

  "Mortgage interest rates have been falling, but why is that? And how much lower are they going to fall?"

The Cycle of Easing, Inflation, and Rate Increases [03:43]

• The speaker expects the Federal Reserve to continue cutting interest rates and begin quantitative easing in 2026, involving purchasing assets and printing money.
• This easing cycle is described as becoming "worse and worse," requiring more money printing to keep the system afloat, potentially to bail out banks, commercial real estate, or the stock market.
• The easing cycle is predicted to occur in Q1, Q3, or potentially Q4 of 2026, with heavy easing if it extends to Q4.
• In plain English, this means mortgage interest rates will continue to go down, creating a window of opportunity for refinancing or locking in rates.
• This window is expected to last a few months after rates bottom out.
• Once the Federal Reserve's balance sheet expands or money is printed, inflation is expected to follow, causing mortgage interest rates to spike back up as 10-year and 30-year yields rise with raging inflation.

  "Once inflation starts catching up, when it starts spiking up again, then mortgage interest rates are going to shoot back up."

Home Prices and Inflationary Pressures in 2026 [06:08]

• The speaker reiterates that home prices are expected to follow a similar trend to mortgage rates due to the Federal Reserve cutting interest rates and printing trillions of dollars.
• This monetary expansion is anticipated to cause inflation in the prices of goods and services, including home prices, which will not be immune.
• The argument against home prices crashing is that if the Federal Reserve is printing trillions and inflation is coming, it would be counterintuitive for prices to fall.
• The speaker cites a headline from 2022 about home prices hitting an all-time high in 2025.
• The argument that affordability issues will prevent prices from rising is countered by observing high prices in places like California and New York City, suggesting that prices can continue to rise.
• The speaker believes that large entities like BlackRock will become the "new landlord."
• For those considering buying, the advice is to buy now because the housing situation is expected to worsen.

  "Why would home prices crash if the Federal Reserve is going to blast on the money printers and print trillions of dollars?"

Foreclosure Activity and Recessionary Indicators [07:44]

• Foreclosure activity is on the rise, which the speaker notes is not surprising given their skepticism about the reported strength of the labor market and economy.
• The speaker believes that income has not kept pace with inflation and that the labor market is worse than officially reported, suggesting a recession may already be underway.
• However, foreclosures are nowhere near the levels seen during the previous housing market crash.
• To trigger a crash like before, foreclosures would need to spike significantly.
• The current level of foreclosures is not even at the level seen in 2005.
• Waiting for foreclosures to spike to predict a crash could mean waiting about 5 years for the peak in foreclosures, with home prices not bottoming out until years later (e.g., 2012 in the last crash).
• This implies a potential wait of another 8 to 10 years for a market bottom, during which home prices might continue to rise.
• A bad time to buy would be when foreclosures have massively spiked, signaling an impending price crash.

  "If you're waiting for foreclosures to spike so that home prices crash, you're going to be waiting for a while."

The Role of Homeownership and Future Outlook [09:55]

• The speaker addresses the argument that buying a home leads to losses due to property taxes and other expenses.
• They point out that landlords pass on increased property taxes to renters, a fact that may not be fully understood by those making the expense argument.
• Buying a home to live in is framed not as an investment for quick riches, but as owning assets to protect against inflation.
• An anecdote is shared about a friend whose rent increased by 40% overnight, highlighting the instability of renting.
• The speaker expresses a desire for affordable housing, a strong labor market, and a booming economy but does not expect these conditions for 2026, based on the data and current situation.

  "It's about owning your own assets to protect yourself from inflation."