The Housing Safety Net amidst Economic Uncertainty
Following the recent announcement of tariffs by the Trump administration, global stock markets have experienced significant declines, raising concerns about the direction of the economy. As Lisa Sturtevant, chief economist at Bright MLS, stated, “The stock market has had its biggest losses since 2020. The expected impacts of the administration’s tariffs, along with general economic uncertainty, will mean that businesses will hold back on hiring and individuals and families will hold back on spending.”
This volatile environment poses potential challenges for homebuyers, as evidenced by a recent canceled deal that could signal broader hesitancy among those looking to purchase property. However, some experts, like real estate agent Stella, argue that the current situation may still favor those who are financially prepared to buy, affirming, “I don’t know a lot about global markets, but I do know that real estate is a safe harbor investment. So if times are uncertain, go buy real estate.”
Particularly in the Greater Boston area, Stella anticipates a steady home value increase of 2% to 5% in the current year, aligning with pre-pandemic trends. He emphasized the long-term stability of real estate investments, stating, “It is a safe place to put your money.” Yet, as economic factors shift, the decision to buy remains complex for many consumers.
On one hand, the economic slowdown triggered by the tariff announcement has introduced anxiety regarding job security and inflation, prompting some to reconsider entering the housing market. Conversely, these challenging conditions have resulted in lower mortgage rates, with many prospective buyers remaining on the sidelines, hoping for even better rates. Sturtevant noted, “The tariff announcements sent mortgage rates lower but those rates may be cold comfort to prospective buyers who are increasingly worried about job security and inflation.”
Diverse Perspectives on the Housing Market
Reactions to the current economic climate vary significantly across different markets. Brian Huskey, broker-owner of ERA American Real Estate in Billings, Montana, observed that buyers in his area are optimistic about the recent dip in mortgage rates. Huskey reported receiving multiple inquiries from eager buyers, stating, “I’ve had calls from three or four buyers today who are really excited about rates coming down. The market here has been frozen all winter, and I think these rates are helping it get to a point where it can really open up again.”
In contrast, Michael Nourmand, president of Nourmand & Associates in Southern California, is less convinced that dropping interest rates will balance out buyer hesitation. He remarked, “Buyers have become used to rates hovering in the 6% range, and they are either making a move or not, so unless they come down a lot, I don’t see a lot changing.” This situation is especially challenging for those looking to upgrade their homes without losing their lower-rate mortgages.
Meanwhile, real estate agent Mandy Nichols in Dallas-Fort Worth noted a significant cooling in the market compared to the pandemic peak. She expressed her desire for more activity, stating, “I remember when I couldn’t find a house in Colleyville, but now we have over 80 on the market and the days on market is close to two months.” Nichols reflected on the broader uncertainty impacting consumer behavior, saying, “I’m just kind of baffled by the whole thing.”
Regardless of the mixed sentiments, Mike Pappas, CEO of The Keyes Company, remains confident that transactions will continue to take place, albeit at a slower pace. He observed: “We are seeing the vicissitudes of life take over, and those hesitant to sell can’t wait anymore. We are seeing rising inventory…”
Challenges Facing the Construction Market
The tariffs are not only affecting consumer confidence but are also expected to have direct consequences on the new construction industry. In Southern California, the situation is compounded by reconstruction efforts following the Los Angeles wildfires. Nourmand expressed concerns about rising material costs for builders, predicting that these will significantly impact consumers. “You have the tariffs, which is one way of making things more expensive, but then you have whole towns needing to be rebuilt at the same time, raising demand…” he stated.
As homeowners seek to rebuild or expand their properties, Nourmand and Stella both foresee increased costs in construction. Stella mentioned feedback from builders who are quoting prices between $700 and $1,000 per square foot for home additions, a trend that may push some families to consider purchasing new homes instead of renovating.
While it remains early to determine the full impact of the recent tariffs on the housing market, both Stella and Nourmand agree that these economic changes could lead to shifts in how individuals approach buying and building homes.