Oct 13, 2026 · 23 min
The Fed’s mandate leaves housing exposed to higher rates
Why the Fed wants more rate hikes
The episode explains why inflation and employment can keep monetary policy restrictive even as mortgage costs and housing activity deteriorate.
- 1The Federal Reserve prioritizes inflation and employment, not existing-home sales or housing construction, when setting policy.
- 2A break above the 10-year Treasury’s 5.35% threshold could push mortgage rates substantially higher.
- 3Mortgage spreads remain better than 2025 levels, but renewed deterioration could drive rates above 8%.
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Logan Mohtashami identifies 5.35% on the 10-year Treasury as the key level separating a difficult mortgage-rate outlook from substantially higher rates.
The brief
Sarah Wilkinson and Logan Mohtashami examine the Federal Reserve’s hawkish turn, asking why housing weakness carries so little weight in its policy decisions.
Mohtashami argues that existing-home sales and housing construction are outside the Fed’s direct mandate, leaving inflation and employment to drive rates even when housing suffers.
The mortgage-rate outlook hinges on the 10-year Treasury’s 5.35% threshold: a break above it could bring substantially higher yields and borrowing costs.
Seasonal listing patterns complicate the idea that higher rates automatically unlock inventory, especially after the unusual timing of housing activity during and after COVID.
The episode closes with a warning that weaker mortgage spreads could push rates above 8%, while revisiting why forbearance-era crash forecasts failed.