MW Fed Chair Kevin Warsh wants to get inflation under control. That could be bad news for home buyers seeking lower mortgage rates.
Andrew Keshner
Almost 3 million households have been priced out of homeownership in the time since Warsh was picked to lead the Fed
The Fed is in a "new era," but home buyers are facing the same old affordability challenges.
In his first interest-rate decision at the helm of the Federal Reserve, Kevin Warsh showed that his aim is curbing inflation.
Someone shopping for groceries would cheer that focus. It's a different story for someone shopping for a house.
The Fed kept its benchmark rate unchanged, as expected. The hawkish tilt was less expected: Members of the central bank's interest-rate committee left the door open for at least one rate increase this year.
"Persistently high prices are a burden for the American people, but the recent past need not be prologue," Warsh told reporters. He later added, "This committee will deliver price stability."
Warsh is a new face at the Fed - but millions of aspiring home buyers still have the same challenges breaking into the pricey housing market. Elevated mortgage rates, high home prices and a chronic shortage of inventory have sidelined millions of would-be homeowners.
Following Warsh's debut meeting at the Fed, early signs indicate that mortgage rates won't be coming down soon. Rates jumped in the wake of the Fed decision, according to Mortgage News Daily.
"We're in a new era and it's going to take a while for markets to figure out exactly how to react," said Chen Zhao, head of economics research at the real-estate platform Redfin. "But one thing is clear: the committee as a whole is taking inflation very seriously, which means mortgage rates are unlikely to retreat much in the near future."
The good news for people trying to sell their house is that the job market has improved and that's buoying demand, even in the face of higher mortgage rates, Zhao added in a statement.
The 30-year fixed-rate mortgage averaged 6.47% on Thursday, down slightly from 6.52% a week earlier, according to Freddie Mac (FMCC). At the same time last year, rates averaged 6.81%.
The Fed itself does not set mortgage rates. When mortgage lenders set their rates, they tend to follow the yield on the 10-year Treasury note BX:TMUBMUSD10Y, which was up Wednesday afternoon but fell back on Thursday morning.
If the Fed did hike its short-term rate, that wouldn't guarantee a corresponding increase for mortgage rates, said Jeff DerGurahian, chief investment officer and head economist at loanDepot $(LDI)$. Yet Warsh and the Fed can still help shape mortgage lenders' outlooks, he said.
"If the Fed hikes because inflation is proving sticky or the labor market is staying stronger than expected, that usually tells the market rates may need to stay higher for longer, and that can put upward pressure on Treasury yields and mortgage rates," DerGurahian said in emailed comments.
Successful efforts to curb inflation could pay off for home buyers in search of lower mortgage rates, said Lawrence Yun, chief economist at the National Association of Realtors. "Should the inflation rate subside, mortgage rates could also take a dip," Yun said in a written statement.
Warsh is stepping into his new role halfway through a year that was supposed to see the housing market bounce back after a sluggish 2025. It hasn't worked out that way so far.
Days before the Iran war was launched at the end of February, mortgage rates slipped under 6% for the first time in approximately four years. Then came the effective closure of the Strait of Hormuz, which sent shock waves through the markets for oil, gas and other commodities, including components of fertilizer. In May, inflation rates reached a three-year high.
President Donald Trump had harangued Jerome Powell, Warsh's predecessor at the Fed, for not lowering interest rates, which Trump said was making it impossible for people to buy houses.
When Trump picked Warsh to take over as Fed chair, there were more than 88 million households whose incomes were not high enough to afford a median-priced home worth $413,500 at a 6% mortgage rate, according to the National Association of Home Builders.
The landscape has even turned tougher in recent months, as the war with Iran and rising inflation propelled mortgage rates to 6.5%.
With that increase, approximately 2.8 million more households cannot afford a home. That means some 91 million households are now priced out of homeownership, according to economists at the industry organization.
Even if the Fed can't directly influence mortgage rates, its benchmark rate can have an impact on the supply of housing, said Robert Dietz, chief economist at the NAHB. The rate "affects interest rates for builder loans for construction and land development. And it is a lack of attainable supply that is the primary factor affecting the market."
New home construction fell precipitously to a six-year low in May.
When will mortgage rates go down?
At loanDepot, DerGurahian said it could be a while before mortgage rates drop below 6% - where they were just before the start of the Iran war. "It will likely require the peace agreement to hold, oil prices to ease, inflation to cool and labor data to soften enough that markets stop expecting a Fed hike later this year," he said.
Roadblocks to rates returning to 5.99%, Yun said, include issues around oil and energy. In addition, the "rising federal budget deficit continues to put upward pressure on long-term interest rates, including mortgage rates."
Economists at Fannie Mae (FNMA) are expecting the 30-year mortgage rate to average 6.4% through the first quarter of 2027 and to hold at 6.3% for the rest of 2027.
At his press conference Wednesday, Warsh appeared to acknowledge the challenges would-be home buyers are facing. The Fed isn't the sole influence on the housing market, he said. "But broadly, I would say there, Fed policy appears to be somewhat restrictive."
In other words, "rates are high enough that it is curbing activity," said Josh Jamner, senior investment strategy analyst at ClearBridge Investments.
Yet interest rate levels are a blunt instrument when it comes to tweaking certain parts of the economy, Jamner said in a phone interview. With regulatory changes, mortgage rates could decline even if bond yields stay the same, he said.
Those sorts of changes take time, however. For now, buyers might have to get used to the current rates.
Some say buyers are starting to accept the higher rates. "The rate narrative is shifting," said Odeta Kushi, deputy chief economist at First American, a title-insurance provider.
"Higher-for-longer mortgage rates are becoming more widely accepted, and pent-up demand built over years of constrained affordability and limited inventory is beginning to assert itself," she said in a statement. "Many households are choosing to move forward rather than wait for perfect conditions."
-Andrew Keshner
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(END) Dow Jones Newswires
June 18, 2026 12:05 ET (16:05 GMT)
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