5.99% and The Supply Paradox: Why The Window Is Now
Market Analysis Andréa Elliott January 12, 2026
Market Analysis Andréa Elliott January 12, 2026
If you have been watching business broadcasts, you likely did a double-take Friday morning. It was announced that we just broke the psychological floor. The 30-year fixed rate hit 5.99%.
Just 24 hours before, we were hovering north of 6.21%. A 20+ basis point drop overnight is a statement. For my clients who have been sitting on cash waiting for the perfect entry, the dinner bell just rang.
But this is not a normal market correction. There is a deeper, more complex story unfolding that suggests this window might be tighter than we think.
This rate drop was manufactured. It is the direct result of the President’s executive directive to Fannie Mae and Freddie Mac to purchase a massive $200 Billion in Mortgage-Backed Securities (MBS).
This is not a subtle monetary nudge. This is the administration utilizing the retained portfolios of the GSEs to force the cost of borrowing down.
What this means for you:
The "Put" is Back: The administration has signaled that 6% is the red line they are willing to defend.
Immediate Liquidity: This floods the mortgage market with capital, artificially suppressing yields.
Psychological Shift: The "wait and see" crowd is waking up. Expect competition to heat up immediately.
However, rates are only half the equation. The other half is supply. And that is where the narrative gets complicated.
While the administration pushes rates down, they are simultaneously threatening to block "private capital" (institutional investors) from the housing market. The populist argument is that kicking out the hedge funds will free up homes for families.
Stephen Scherr, Co-President of Pretium and a heavyweight in institutional investment, offered a critical counterpoint on CNBC this past Friday. His thesis is stark:
We have a massive housing deficit. Building new communities and revitalizing old stock requires billions in capital. If regulations push private equity out, that funding dries up.
If Scherr is right, blocking private capital will ultimately worsen the supply shortage, leaving us with cheap rates but nothing to buy.
To add another layer of intrigue, Bill Pulte (now overseeing the FHFA) just dropped a significant breadcrumb. He announced that the President plans to unveil a series of additional housing affordability measures at the World Economic Forum in Davos later this month.
This suggests the $200 billion buy order was just the opening volley. We are likely looking at a sustained campaign to alter the housing landscape before the spring market fully ignites.
For us locally, this creates a specific urgency. Both Houston and New Braunfels have always been a market that builds their way to affordability. If national policy chokes off development capital, our new inventory could stall.
The Outlook for Houston's, The Villages in the Memorial area, Candlelight Plaza, Shepherd Park Plaza and New Braunfel's, Vintage Oaks, and Copper Ridge:
Inventory Crunch: Existing, high-quality inventory in prime neighborhoods is about to become much more valuable.
The Paradox: We are looking at a scenario where money is cheaper (5.99%), but quality homes become scarcer.
Action Plan: Do not mistake a subsidized rate for a permanent fix. The $200 billion injection fixes the cost of money temporarily, but the regulatory headwinds could cap the volume of homes permanently.
The strategic move: Buy or sell the asset now while the rate is subsidized and before the supply constraints truly bite.
Just as we digest the rate drop, reports from CNBC indicate that Fed Chair Jerome Powell is facing potential legal scrutiny. While political friction between the White House and the Fed is not new, this escalation adds a layer of complexity to the financial landscape.
What this means for rates: Markets generally dislike uncertainty. When the future path of monetary policy becomes unclear, we often see increased volatility in bond yields.
The Reaction: We may see daily fluctuations in rates as the market digests the headlines.
The Bottom Line: This reinforces the value of tangible assets. In a world where headlines can move markets overnight, high-quality real estate remains a stable, long-term store of value that looks past the daily news cycle.
Rates dropped 20+ basis points because the President directed Fannie Mae and Freddie Mac to purchase $200 billion in Mortgage-Backed Securities (MBS). This artificial demand drove bond prices up and yields (rates) down.
Experts like Stephen Scherr of Pretium argue that banning private capital will hurt the market. Institutional investors provide the necessary liquidity to build new communities and renovate aging homes. Removing them could worsen the supply shortage.
Bill Pulte recently announced that the President will reveal further housing affordability measures at the World Economic Forum in Davos later this month, signaling continued government intervention in the real estate sector. I'll be listening for any announcements to share.
Yes. With rates temporarily suppressed around 6% and closing at 6.06% on Friday, a potential supply squeeze looming due to regulatory changes, current inventory in prime areas like Houston's, The Villages in the Memorial Area, Candlelight Plaza, Shepherd Park Plaza, and New Braunfel's, Vintage Oaks, and Copper Ridge presents a strong "buy" or "sell" opportunity.
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