Why America's housing market is slowing down – again
The housing market, long a pillar of household stability and economic strength, is showing signs of strain as broader economic headwinds take hold across the United States.
According to the Washington Post, recent data suggests that a weakening economy – marked by a contraction in GDP during the first quarter of 2025 – is beginning to drag on real estate activity. As interest and mortgage rates remain elevated, consumer confidence has slipped and stock market volatility has made would-be buyers more cautious.
Robert Dietz, chief economist at the National Association of Home Builders, has described the situation as a ‘wait-and-see’ economy.” He attributed the growing uncertainty to unpredictable price signals and a sluggish financial outlook.
The Federal Reserve’s success in curbing inflation from historic highs has come with side effects. While a dip in the 10-year Treasury yield last month led to a temporary drop in mortgage rates and a spike in refinancing applications, the broader market remains hesitant. Existing-home sales fell nearly 6% in March — the largest drop in over two years — and housing starts declined more than 11% as builders face rising costs and a tight labor market.
Trade tensions impacting the construction sector
President Donald Trump’s ongoing trade war has also hit the construction industry hard. New tariffs have driven up prices for materials such as appliances and hardware, with builders estimating nearly $11,000 in added cost per home, according to survey data from the National Association of Home Builders/Wells Fargo Housing Market Index. Sixty percent of builders report their suppliers have already raised prices.
Despite some resilience among wealthier buyers and national builders with longer-term supply contracts, the middle market is feeling squeezed. Rent prices have increased for three straight months, and home prices climbed 3.9% year-over-year in February, according to the S&P CoreLogic Case-Shiller Index.
Retirees and long-time homeowners like Bill Vallaire in Prescott, Arizona, are caught in the middle. Vallaire wants to move closer to Phoenix for his wife’s medical care but says the math doesn’t add up. “We’re kind of stuck,” he told the Washington Post, citing how higher mortgage rates would more than triple his current monthly payment.
In some markets, sellers are pulling listings entirely. Nate and Margie Sanchez outside Phoenix lowered their asking price by $80,000 but found buyers demanding even more concessions. “It was a tipping point,” said Sanchez, who decided to stay put.
With economists lowering projections for home sales and construction starts, and the Mortgage Bankers Association predicting minimal new supply, industry experts warn that without shifts in policy or rates, the uncertainty may continue to weigh heavily on housing throughout the year.
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