‘Doubt and hesitation' are ripping through the housing market: ‘People are starting their home search, then backing out'
Painfully high home prices and mortgage rates have scared off some potential homebuyers, according to Redfin. Despite an easing of China tariffs, mortgage rates are being pushed higher. High prices have created a lopsided housing market, with homes for sale at a five-year-high, but few buyers.
As elevated home prices and mortgage rates continue to weigh on the housing market, would-be home buyers are pulling out, according to a Redfin report.
Stubbornly high home prices are keeping monthly housing payments uncomfortably high: The median payment this week was a hefty $2,860, just $6 less than the record high set last week.
Pending home sales across the U.S. slipped 3.4% compared to this time last year during a four-week period ending May 11. That's the lowest level on record during this timeframe, outside of 2020, according to Redfin. The median asking price rose 6.5% to $429,850 from a year ago, while the median sale price grew 1.8% to $390,998.
Despite President Donald Trump's tariff reductions on Beijing, which have rejuvenated the stock market and mitigated concerns of a recession, mortgage rates are still pushing higher, Redfin head of economic research Chen Zhao said.
Following the tariff slash, the average 30-year mortgage rate edged upward to 6.81% from 6.76% this week, according to Freddie Mac. Additionally, the average 15-year mortgage jumped from 5.89% to 5.92%.
'It's a catch-22 for homebuyers,' Redfin head of economic research Chen Zhao said. 'Mortgage rates are unlikely to fall unless all of the new tariffs are eliminated, or if the country falls into a fairly severe recession—which would cut housing budgets for many Americans.'
Real estate agents in North Carolina, Ohio, Oregon, and Texas said that buyers are holding back on pursuing a home because of a potential economic downturn.
'There's a lot of doubt and hesitation among house hunters,' Portland real estate agent Meme Loggins said in the report. 'People are starting their home search, then backing out because they either talked to their lender and realized how high their monthly payments would be, or they're feeling jittery about tariffs, a potential recession, and/or the possibility of getting laid off.'
Amid the economic uncertainty, those who are actually closing on homes are searching for more affordable housing.
'One smart strategy I'm seeing among the people who are buying right now: They're looking for condos or small houses to lower their monthly payments to simplify their life,' Loggins said. 'And a smart strategy for sellers is offering mortgage-rate buydowns to pique buyers' interest.'
A tapered demand for housing is coupled with an above-average supply for this time of year. New listings have jumped 5.1% since this time last year and homes for sale have skyrocketed 14.3% to a five-year high. In April, the lopsided supply and demand favored buyers as nearly 44% of sellers offered concessions to buyers, according to a different Redfin report.
This story was originally featured on Fortune.com
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