Why Buying Beats Renting In Some States And What The Fed Cut Really Means

We unpack why rates rose right after the Fed cut, where they may settle, and how affordability will shift as more housing funds move from DC to the states. We compare Minnesota, Arizona, and Florida to show when renting loses to buying and what 2026 policy could change.

Reach out to Nikki because she can run those numbers and really give you a ground level understanding of which is it buying, is it renting, is it a combination, and why?

Chapters

• 0:00 Fed Cut And Rate Volatility
• 1:40 Where Mortgage Rates May Land
• 2:19 2026 Affordability And Policy Shifts
• 4:00 What Counts As Affordable Housing
• 4:52 Minnesota: Income Needed To Buy
• 5:51 Arizona: Renting Versus Owning Gap
• 7:30 Florida: Higher Incomes To Purchase
• 8:56 Deregulation To Boost Homebuilding
• 10:44 How State-Level Funds Affect Agents
• 12:42 Government Shutdown: What’s Impacted

Transcript

SPEAKER_00: 0:37

All right, it's November, November 3rd, and Nikki, as usual, is here for market updates. So how's it going?

SPEAKER_01: 0:45

Good. Good morning, everyone. So we did get our Fed rate cut last week that we were talking about. They dropped their interest rate by a quarter, which helps us out a little bit. Historically speaking, when from a mortgage interest rate standpoint, a couple weeks before the Fed cut, we will see mortgage interest rates start to drop and improve. So that, you know, in anticipation for that Fed rate drop. Ironically, what happens right after the Fed rate drop is that the bond market does not like it. So it reacts negatively and it'll bring those interest rates right back up for a couple, two to three days before they'll settle back down into where they were prior to the rate cut. So what we saw last week on Thursday, Friday, and again today is we're seeing those interest rates go up a little bit into that low to mid-ish, six-ish range. And then they'll come back down over the next week or so and be in probably settle back down into the high fives. And dare I say mid-fives. I don't want to like say that too much, but so we are getting better overall from an interest rate standpoint. The big agenda for 2026 in the mortgage industry is going to be surrounding housing affordability. A lot of things are happening in the Trump administration from a funding standpoint and from a budget standpoint that are going to affect affordability going into 2026. A lot of that federal program funding for things like Section 8, other housing programs, down payment assistance, et cetera, is being pushed from the federal budget down to the local or state budget. So it kind of got me thinking doing some research on, well, what does that mean? What is how can that be helpful for us as we move into 2026? So what I came up with is that there are statistics that talk about housing affordability. And when we talk about housing affordability, it is a moving target based on a lot of economic structures. But what does a person or an individual family need to make in order to afford a home in different states? So I put together some information on Minnesota, Arizona, and Florida, some of the, you know, really more prominent areas of where I help service people. That's not to say that we can't get the information for other states, but talking about housing affordability. So what we talk about is in order to rent or in order to purchase a two-bedroom home, the affordability scale, for example, in Minnesota says that a full-time worker must be earning on average$28.23 an hour in order to afford that two-bedroom home, according to the statistics. That means that without their debt-to-income ratio going over 30% from a housing standpoint only, they need to make$58,711 per year in order to afford a two-bedroom home in the state of Minnesota. Now, now, mind you, in the state of Minnesota, obviously there's a huge metropolitan area in Minneapolis where those numbers are actually, you know, will need to go up. But even in the outskirts of Minnesota, it takes all the entire state into consideration. So if you have one person or two-person family that are making$58,000, in theory, they can afford a two-bedroom home. So that's, you know, that's good news. That seems pretty affordable considering pay rates, et cetera, of what's going on today. If we look at Arizona, Arizona is a little bit different of a story because Arizona has a lot of rental renters and has a lot of higher rents in comparison to what the actual housing cost is. So the housing wage in Arizona for a two-bedroom rental is$34.18 per hour. So a family would need to make at least$34,18 or$62,000 a year. If they wanted to purchase a two-bedroom home in Arizona, they only really need to make$23.44 an hour. So there's a significant difference in the state of Arizona, particularly between renting a two-bedroom and owning a two-bedroom. So it's it's really interesting to see that because Arizona is a little bit more transient. You have a lot of snowbirds coming in that are, you know, driving them rental prices up. So in the state of Arizona, it's definitely more economical to purchase a home than it is to rent a home. So that's, you know, that's good news. The good news is again, if you think about even$34.18 an hour, that's doable with two people, two-person income. So that's, you know, that's the good news. So there is some still some affordability in the state. If we look at Florida, so Florida's actually a little bit even higher. So the income needs to be around$77,522 annually to afford a two-bedroom home from a purchase standpoint. Again, Florida's a little bit different because they do have a huge rental market, but they also have huge metropolitan areas and multiple metropolitan areas. So you can pretty much say that throughout the state, the 72,000 will probably get you there in most of the state, minus some of the more prestigious areas. And so basically, the message here is that there is still some affordability measure when it comes to being able to purchase a home versus renting a home as we move into 2026. With the programs that are available, you know, for down payment assistance, things of that nature, it can really help out with that affordability measure. Also, one important thing that the Trump administration is trying to push down is a deregulation on some federal funds that go towards building new homes. And if that happens, what that does is it opens up more flexibility and more money and more dollars to be pushed down to builders to as incentives to keep building homes at lower costs so that they go, they get passed down to the consumer at a lower cost, making them more affordable. So if that agenda does get pushed, and I'm not sure, you know, like if they're saying, oh, it's a huge, you know, agenda for us to make sure it happens, but it definitely is in a bill with Congress right now to deregulate that section of funds so that they can be pushed more easily down to the state, more easily down to the builders to be able to make to build homes, you know, more economically so that that cost doesn't need to be passed on to the consumer.

SPEAKER_00: 6:28

Yeah, I was gonna ask timing. So yeah, it looks like it's it's on the floor now. So we'll see how we gotta get the government back open in order to pass on.

SPEAKER_01: 6:36

So yeah. So moving into 2026, so that is really the concentration of the administration as it pertains to housing. One other thing I wanted to mention. They also looked at the Trump administration, has also looked at all the programs that are federally funded right now for housing affordability and looked at which ones are actually helping people and which ones are just kind of like sitting out there getting funded and not really doing much from that standpoint. And there's they've done a consolidated effort as well on this bill, as well as saying, let's remove this program, this program, and this program, which aren't really actually doing anything. And it's to the tune of about$22 million that they want to move over to other parts of HUD, other parts of housing and urban urban development, so that they can again bring the funds down to that state level to be dispersed out to get those homes more affordable for everyone involved. So we're really hopeful that, you know, this push will work and that, you know, we'll be able to get the funding down to where it needs to go in order to help increase that affordability in 2026.

SPEAKER_00: 7:36

So just for the agents that are tuning in, or even I know that general population just wants to understand and know these updates and are listening, either, you know, whichever platform they're on, to a mortgage standpoint or as an agent, when they're pushing those funds down to a state level, like what does that mean for us as agents that are helping buyers? Or in your perception, is that a good thing? Is it not so good and why?

SPEAKER_01: 8:07

That's a great question. So a lot of times when you have federal monies that are coming down to the state, the state then decides what to do with those, whether they put those, you know, towards Section 8 housing or whether they put those towards more down payment assistance availability from a state level to potential buyers, most of these funds that are going to be pushed down are really gonna go towards the builders to allow them to build homes or to have federal subsidies in order to build these homes. So, in other words, a home that might cost a builder, let's say,$300,000 to build with the federal help, they don't have to pass that cost on to the consumer. Making a$300,000 bill cost the consumer$400,000. The$300,000 bill maybe cost the consumer then$350,000. So that's the idea behind it. And obviously those numbers are just examples. But the idea is that they encourage builders with incentives to build more homes, which is going to increase the supply, which is a help going to satisfy the demand. Now, is it going to happen in a year? Absolutely not. But if we can get it to progress forward and get it to move and move the needle at least a little bit, that should help with the the price of the home remaining stable or going up slightly, whereas before we're, you know, we were planning on it increasing quite significantly. Yep.

SPEAKER_00: 9:19

Absolutely. Wonderful. Thank you. I just wanted to definitely have that clarification. And again, another timeline. So as to think what's happening now, how how and when will that affect us and impact us for sure? Yes. And is there anything? Because I know, you know, with the government going into what is this day 33, 34 of the shutdown, you know, from a real estate standpoint or an agent standpoint, is there anything that we should know, or from a mortgage standpoint into real estate? Like what does that mean for you? Or what are you seeing or looking forward to or anticipating? Yeah.

SPEAKER_01: 9:57

So with this, really it's just business as usual from a mortgage standpoint. From Fannie Mae, they're still fully operational. Everything's running as it should. The only program that is potentially affected is the USDA or rural development program. That has to be opened back up in order for those funds to be secured. But I haven't, you know, the amount of USDA loans that, you know, are done are not all that many. But yes, that program is affected right now with the shutdown because they can't get funds out to fund those loans or the subsidy on those loans. So that's the only thing that really is being affected at this time. Otherwise, it is just business as usual. Interest rates are responding as they should be, you know, just to the market and not to the shutdown, which is really nice too.

SPEAKER_00: 10:38

Perfect. Good. I just wanted to put that out there because I know a lot of people are tuning in, are just wondering. And yeah, from my standpoint, I think I've done a couple USDA loans in my, but I'm in the Minneapolis more, you know, so metro area. So yeah, and if that is impacting some of the agents listening, should they be reaching out to you or what can be reaching out to me?

SPEAKER_01: 11:03

We'll find alternative programs. If we can't find alternative programs, we'll, you know, get a we'll try to get a timeline as to when those funds can be guaranteed and put back on there, etc. So we're hoping that you know the shutdown will end soon, as everyone is. But until that time, we just, you know, we just, like I said, business as usual. Perfect.

SPEAKER_00: 11:19

Good to hear. Good. Yes, wonderful. Well, this is all really good information. I will definitely re-watch again. I I love how rents and snowbirds and the for housing affordability, renting versus buying, it varies from state to state based upon that. And I think that that's overlooked quite often. So I'm so glad and grateful that you highlighted that today. So if you have questions about your state or places that you're working with investors or renters or whatever that looks like, reach out to Nikki because she can run those numbers and really give you a ground level understanding of which is it buying, is it renting, is it a combination, and why? So that again, you can be educated, you can go to your potential clients or past clients or prospects, and you can give them the actual information, correct information backed by numbers and understand. So I'll I'll leave with my kind of word of the week as we are considered the experts. We do hold the license. So coming to calls like this or listening and finding the information to better, you know, fill your tool belt up with tools and resources and understanding and knowledge and up-to-the-date information is your job as an agent. And having people like Nikki in your corner, it makes my job a lot easier. So if you don't have that, uh definitely reach out to Nikki. She's a wealth of knowledge, and she's so generous with her time and information and knowledge. And that's definitely power for me and for you. So again, appreciate you and all you do and continuing to show up here. Absolutely. Wonderful. Yes, as well. You too, and we'll see you next week. All right, bye. Bye.