U.S. Treasury Secretary Scott Bessent warns that high interest rates may have already pushed housing market into recession

02 November 2025

S Treasury Secretary Scott Bessent attends a press conference held by U.S. President Donald Trump and UK Prime Minister Keir Starmer at Chequers at the conclusion of a state visit on September 18, 2025 in Aylesbury, England. Leon Neal/Pool via REUTERS/File Photo

In a striking statement that raises fresh concerns about the health of the American economy, Scott Bessent, the U.S. Treasury Secretary, declared that while the country at large remains in decent shape, specific sectors most notably housing may already be in recession territory due to elevated interest rates. Bessent made his remarks during an appearance on CNN’s “State of the Union” programme where he emphasized that the effects of monetary policy are unevenly distributed and that low-income consumers are bearing the brunt of borrowing costs.

According to Bessent, the root of the trouble lies in mortgage rates that remain high despite efforts to reduce them, a factor he believes has stifled housing sales and undermined the broader real-estate market. He noted that pending home sales in September were flat, as reported by the National Association of Realtors, which signals either stagnation or early contraction in some housing regions. The Treasury Secretary framed this as a consequence of monetary policy that has been too tight for too long, suggesting that the sector-specific downturn is a clear indication that the policy may be inducing rather than responding to a recession.

Bessent went further by suggesting that the era of high rates cannot persist without broader risk: “If we are contracting spending, then I would think inflation would be dropping. If inflation is dropping, then the Fed should be cutting rates,” he said. He linked his argument to the government’s own fiscal adjustment that reduced the deficit-to-GDP ratio from 6.4 % to 5.9 %, positioning it as a backdrop for a potential rate-cutting pathway. Yet he flagged that when job markets are tight, inflation might fall faster than the Federal Reserve expects, reinforcing his view that the central bank should act sooner rather than later.

This message comes amidst a climate where the Federal Reserve has signalled caution. Fed Chair Jerome Powell recently indicated that further policy loosening might not come at the December meeting, a position that conflicted with sentiments from Fed Governor Stephen Miran, who warned that keeping policy too tight risks triggering a recession. Miran, formerly the White House Council of Economic Advisers chair, dissented from the recent rate decision and argued for a steeper cut of 50 basis points instead of the 25 basis point reduction. The spindle of tension between the Treasury and the Fed highlights the tug-of-war between growth and inflation control.

Why does one sector matter so much for the broader picture? Housing is inextricably linked to consumer wealth, job creation in construction and home-related services, and regional economies across the U.S. When home sales slow, price appreciation stalls and homeowners become hesitant, which sets off a domino effect on spending, lending and confidence. By highlighting that housing might already be in recession, Bessent suggests that the broader economy may be more fragile than headline numbers imply.

It is especially notable that Bessent targeted low-value borrowers as the hardest hit, pointing to the distributive effects of tight policy. These consumers often have fewer assets, higher debt burdens, and less ability to absorb rate stress. As their borrowing costs rise, their spending power falls, making them sound early alarms for broader demand compression. Housing markets in metro areas where affordability is stretched may be the canaries in the mine.

From an investment perspective the Treasury Secretary’s commentary adds to the unease among market participants. Investors monitor housing indicators such as home-sales volumes, mortgage applications, housing starts and builder sentiment for signs of broader economic weakness. A sector in retreat raises questions about consumer reliance, bank exposures to mortgage-related assets, and regional banking vulnerabilities reminding stakeholders that what happens to housing does not stay in housing.

The timing of the remark early November also matters. It comes as the Fed contemplates its next move, inflation appears to be easing, and economic growth lacks the punch it once had. If the Treasury is right, the cost of delayed policy easing may not only be higher interest bills but a deeper contraction in growth that takes longer to reverse. Bessent’s call for accelerated rate cuts therefore represents not just a macro-economic view but a strategic signal to the Fed and markets.

In conjuring the image of sectors already in recession while the headline economy seems stable, the Treasury Secretary raises a larger question: how long can policy stay restrictive when tangible cracks are visible in key parts of the economy? His answer seems clear: not much longer. The housing sector is not just an afterthought it may be a front-line indicator of systemic risk.