Core Viewpoint - The article argues that Trump's housing reform is unlikely to boost the U.S. real estate market, which remains in a "weak supply and demand" state despite significant interest rate cuts by the Federal Reserve in 2024-2025 [4][5]. Group 1: Current Market Conditions - The U.S. real estate market has not entered a recovery cycle due to limited reductions in mortgage rates, which remain above 6%, significantly higher than the average of 4.3% for existing mortgages [5]. - Demand is declining due to high home prices, elevated mortgage rates, and an affordability crisis, with new and existing home sales expected to be lower in 2025 compared to 2024 [4]. - Supply is constrained by a "lock-in effect" in the existing home market and a decrease in new home supply due to rising material tariffs and interest rate fluctuations, leading to sustained high home prices [4][5]. Group 2: Future Outlook - As the 2026 midterm elections approach, Trump's housing reform is anticipated to focus on lowering mortgage costs, activating the supply market, and further interest rate cuts [6][7]. - However, significant interest rate cuts may not effectively translate to lower mortgage rates due to legislative and judicial constraints, as well as tariff risks and construction cycle delays, suggesting a baseline expectation of a weak recovery in the U.S. real estate market by 2026 [7]. Group 3: Forward-Looking Indicators - To observe the U.S. real estate cycle, it is important to construct forward-looking variables, particularly the spread between current mortgage rates and existing mortgage rates [8]. - Historical data indicates that a spread of 90-100 basis points, corresponding to around 5% mortgage rates, could signal the start of a new real estate cycle, with a corresponding 10-year U.S. Treasury yield expected to be around 3.2%-3.3% [8].

Market Overview - The U.S. real estate market remains in a "weak supply and demand" state despite the Federal Reserve's significant interest rate cuts of 175 basis points (bps) from September 2024 to August 2025, with new and existing home sales projected to decline in 2025 compared to 2024 levels[2][12]. - The mortgage interest rate remains high, averaging over 6%, significantly above the existing mortgage rate average of approximately 4.3%, limiting the effectiveness of the Fed's rate cuts on the housing market[3][45]. Supply and Demand Dynamics - Demand is hindered by high home prices and affordability crises, leading to a decrease in home buying and mortgage demand, with 2025 new home sales expected to be below 2024 levels[2][12]. - The existing home market faces tight inventory due to the "lock-in effect," where homeowners with low fixed-rate mortgages are reluctant to sell, exacerbating supply shortages[21][45]. Future Projections - The anticipated "Trump housing reform" in 2026 aims to lower mortgage costs, activate supply markets, and further reduce interest rates, but significant legislative and judicial constraints may limit its effectiveness[4][50]. - A mortgage rate around 5% is estimated to be a critical threshold for initiating a recovery in the U.S. real estate cycle, with corresponding 10-year Treasury yields expected to be in the range of 3.2%-3.3%[5][50]. Risks and Challenges - The ongoing impact of tariffs on construction materials is expected to further increase housing costs, complicating supply issues and potentially reducing new housing starts by approximately 450,000 units over the next five years[39][40]. - The current housing supply shortage is estimated at around 2.8 million units, with projections indicating it may take up to 10 years to address this gap under current conditions[21][24].