The Federal Reserve is signaling more rate cuts and Wall Street is already positioning for the rally — but the people who actually need to buy a home or refinance a loan are staring at 7% mortgages through at least 2027, which tells you everything about who rate cuts are really for.

Housing economists from the National Association of Realtors and the National Association of Home Builders now publicly agree: mortgage rates above 7% are the "new normal," according to CNBC. Fannie Mae forecasts rates averaging 7.5% in 2027. The Mortgage Bankers Association expects rates to stay above 7% well into that year. The 3% and 4% mortgages Americans got used to before 2022 aren't coming back.

Meanwhile, Seeking Alpha's investment community is telling its subscribers to buy cheap REITs now and wait for rate cuts to lift valuations. The pitch is straightforward: "valuations are depressed, and discounts to underlying property values are still unusually wide." Private capital will step in when discounts get too large, they argue, and buyouts will push prices back up. Wall Street gets the recovery play. Main Street gets another decade of unaffordable housing.

Here is why the cuts won't trickle down to your mortgage. Rates on home loans track the 10-year Treasury yield, and that yield is being held up by forces the Fed's short-term rate cuts can't touch. Inflation as measured by the Fed's own preferred PCE index hasn't dropped below its 2% target since February 2021 — nearly four years of failure. Investors demand higher bond yields to compensate for the dollars they'll get repaid being worth less.

Then there is the competition for capital. The federal government is borrowing at a staggering pace, and the artificial intelligence boom is sucking enormous private investment into data centers and power infrastructure. Selma Hepp, chief economist at Cotality, told CNBC the economy has moved "from a world with more capital than investment opportunities to one with tremendous competition for capital." More borrowers chasing the same pool of money means higher borrowing costs — full stop.

Banks have also stopped propping up the mortgage market. The 2022-23 rate spike cratered bond portfolios and helped kill Silicon Valley Bank and First Republic. Regulatory scrutiny followed. Tom Graff, chief investment officer at Facet, told CNBC that banks have become "more reluctant to hold mortgage-backed securities" since those losses. Translation: the buyers who used to absorb mortgage debt and push rates lower are sitting on their hands.

And the biggest buyer of all — the Federal Reserve itself — has left the building. During the pandemic, the Fed bought massive quantities of Treasury bonds and mortgage-backed securities to force rates to historic lows. Steve Kaminski, head of residential lending at TD Bank, told CNBC the Fed has "stepped away from actively buying mortgage-backed securities." The artificial floor under your mortgage rate is gone.

So when Wall Street cheers the next rate cut, ask who benefits. The REIT investor buying discounted commercial property? Yes. The family trying to afford a house on a paycheck that still doesn't cover 2024 grocery prices? Not so much.

The Fed spent years telling you inflation was transitory. Now it's telling you rate cuts mean the economy is healing. The 7% mortgage says otherwise.