Housing Market Wobbles as Economic Uncertainty rattles Buyers
LOS ANGELES — A growing sense of unease about the economy is sending ripples through the U.S. housing market, leading to a surge in canceled home purchase agreements and a cautious approach from potential buyers. Real estate agents across the country report a noticeable shift in buyer sentiment, fueled by recession fears, stock market volatility, and concerns over rising costs associated with trade policies.
Scott Price, a real estate agent in Los Angeles, experienced a rare event a few weeks ago when a client backed out of a deal just two days before closing. “This is not a common occurrence for me,” Price said. “It was a very unusual event.” Price attributed the buyer’s decision to a growing concern about potential layoffs at the buyer’s company, leading to a diminished sense of financial security. Rather than risk a meaningful purchase, the buyer forfeited a 3% deposit and walked away from the home.
Price’s experience, while unusual for him, reflects a broader trend. National data reveals a significant uptick in canceled home purchase agreements. According to data provided by Redfin, more than 14% of all home purchase agreements in the U.S. were canceled between March 17 and April 13. That’s “the highest level for this time of year since 2020,” when the onset of the COVID-19 pandemic brought the housing market to a near standstill, analysts say.
The economic headwinds impacting the housing market include concerns about tariffs and broader economic uncertainty. While President Trump announced “reciprocal” tariffs on all imports to the U.S.and later instituted a 90-day pause on many of the highest tariffs (with the exception of China), the stock and bond markets have “experienced massive swings” in response.
Mortgage rates, which directly affect home borrowing costs, are also on the rise. Last week, the average rate on a standard, 30-year fixed mortgage experienced “the largest one-week jump in nearly a year,” tracking the benchmark 10-year Treasury yield, which spiked as high as 4.5% in the weeks after Trump’s initial tariff declaration.
did you know? The 10-year Treasury yield is a key indicator of investor confidence in the U.S. economy. A rising yield typically signals higher borrowing costs across the board.
The increased mortgage rates are especially impactful for first-time homebuyers, according to Maddy Mixter, a Realtor based in tacoma, Washington. “Mortgage rates are a huge factor, especially for first-time homebuyers who are really trying to thread the needle of affordability right now,” Mixter said. “Every tenth of a point increase is a big deal.” Mixter also noted that “First-time homebuyers have been a little more skittish,” expressing anxiety about market rebounds and hesitation to cash out stocks amid volatility. “I think, for the most part, people are kind of taking a step back or being really cautious in their moves in the real estate market,” she added.
The stock market’s recent performance has further dampened enthusiasm. The Dow Jones Industrial Average tumbled 9.1% in the first three weeks of April, marking “worst performance for any April as 1932.” This decline has eroded savings accounts for some prospective buyers, further complicating their ability to make a down payment.
For those whose finances or career prospects are in flux, certified financial planner Douglas Boneparth advises caution.”It’s a case-by-case basis,” he said. “There may be individuals out there who, regardless of uncertainty, have strong savings or feel fine about their job.” However, for those planning to buy a home soon, Boneparth suggests a more conservative investment approach. “if you have a short-term goal, like buying a home in the next handful of years, the money that you need to facilitate that transaction, like a down payment, closing costs, furnishing, moving, all that stuff, that shouldn’t be fully invested in the stock market,” he said. “We need to make sure we have the resources available for that decision.”
The Trump administration’s trade policies are impacting the market in other ways. Tariffs on imported construction goods and appliances are changing the calculation for buyers considering fixer-upper homes. “The main talk I’ve heard about tariffs is from folks who are buying places that need to be gut-renovated,” said Matthew Bizzarro, a Realtor in New York City and Westchester, New York.”Some have started to feel concerned about the cost of goods to renovate and that’s creating pause.”
Mixter in washington state echoed this sentiment, noting that many first-time homebuyers are no longer considering homes that require renovations. “Classically, starter homes need a little bit of shining up,” she said. “But I’ve seen a lot of first-time homebuyers that are really cautiously looking at homes that they coudl just move right in to… just because of the climate and the uncertainty of what’s happening moving forward.”
Pro tip: Consider working with a financial advisor to assess yoru risk tolerance and ensure your investment portfolio is aligned with your short- and long-term financial goals.
The Counterargument
Despite the prevailing caution, some segments of the market remain active. Mixter reported seeing interest in real estate purchases among older homeowners who recently cashed out stock holdings. “For now, they see real estate as a sound investment alternative,” she said, suggesting that while some are retreating from the market, others see it as a safe haven during economic volatility.
FAQ: Navigating the Housing Market in Uncertain Times
Q: Is now a good time to buy a home?
A: It depends on your individual circumstances. Consider your financial stability, job security, and risk tolerance. Consult with a financial advisor to assess your situation.
Q: How are tariffs affecting home prices?
A: Tariffs on imported construction goods and appliances can increase the cost of renovations, potentially impacting the value of fixer-upper homes.
Q: What are the risks of investing my down payment in the stock market?
A: Investing a down payment in the stock market carries risk, especially in the short term. Market volatility can erode your savings, potentially delaying or jeopardizing your home purchase.
Q: What are some alternatives to buying a home right now?
A: If you’re concerned about economic uncertainty, consider renting or delaying your home purchase until you feel more secure. Another alternative is to start researching now, so you have real-world data when it is time to enter the market.
Q: How can I protect myself financially when buying a home during economic uncertainty?
A: Maintain a conservative investment strategy, avoid overextending yourself financially, and build a solid emergency fund.
