In his words, he said that other countries should do the same and lower their interest rates. This push to lower global interest rates makes sense for his agenda and is something we last saw after the Great Financial Crisis. We expect bond yields and the US dollar to rise if the economy improves. Compare that to China, for example; when its economy is struggling so its levels drop significantly. I discussed this issue on the HousingWire Daily podcast on November 7, where I outlined the reasons why President Trump is promoting lower rates.
Trump’s economic policies can be effective if he doesn’t have to worry about the housing recession, and he can export more goods from the US if the dollar weakens. I think this low-level call by President Trump is like a high school basketball coach working with a referee to finally get the calls he wants, especially when construction falls. This time the referee is him The Federal Reserve.
2025 Wild Card?
I wrote this article before the new year, discussing how the residential construction industry is the wild card of 2025. Traditionally, in the economic cycle, housing permits slow down, housing starts to decline, and as mortgage rates remain high, homebuilders often start laying off workers. . This pattern has been observed before every recession in recent history.
In the current housing cycle, however, things like order backlogs, extended project completion times, and price gouging have allowed residential construction workers to stay employed. However, overall completion data is now declining as the backlog is being worked on.
The chart below is very clear about the relationship between the housing market and the economic cycle. Also, let’s remember the manufacturing sector lost jobs in 2024
Now, my 2025 forecast has the 10-year yield peaking at 4.70% and mortgage rates at 7.25%; we basically got there before with mortgage rates before falling a bit. Also, the 10-year yield recently peaked at 4.81% by 2025, currently at 4.64%
Forward-looking sales data from homebuilders fell 6 points, marking the first real decline in some time. This decline can be linked to mortgage rates approaching 6% and remaining strong, which would ease many of the challenges to President Trump and help housing sales rise again.
The US dollar is becoming very strong again. If the president wants to increase the level of exports, he will have to devalue the dollar. One way to achieve this is by lowering interest rates. This does not necessarily mean that the dollar has to fall significantly, but a return to its previous trading levels is something the president hopes to see, and his economic team supports this.
I often joke that if the US dollar hits 115, I will dress up as a dollar for Halloween, as that would create a Freddy Krueger nightmare for the global economy. You may remember that in 2022, when the dollar was trading at 112, the world started to panic. London was about to lose all its pension funds, the Bank of Japan had to intervene and the IMF was urging the Federal Reserve to stop raising rates.
Overall, I am not surprised that the President is asking for lower rates. As I explained in my Nov. 7, higher prices and a strengthening dollar could pose challenges for him. Both the 10-year yield and the US dollar have been rising at the same time, so finding low rates is important, but easier said than done.
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