All the ingredients for a busy spring homebuying season were there: Buyers had more inventory to choose from, mortgage rates were holding steady, and showings and mortgage applications were picking up.
Now, the volatility that gripped financial markets after President Trump announced sweeping tariffs on US trading partners — and continued even after he delayed many of the higher levies — threatens to upend it all. Consumer confidence has plummeted as buyers fear the tariffs will lead to inflation and a recession. Prospective homebuyers, fretting about their job security and investments, are rethinking their searches, and sellers are worried too.
“Sellers are concerned about their home values,” said Jacob Barker, a New York-based broker at Coldwell Banker Warburg. “Buyers, even if they are not personally worried about their own financial position, are loath to put in an offer when the price might be 7% less a few months from now.”
Another weak spring would put the country on course for a third straight year of dismal home sales. Just over 4 million previously owned homes were sold last year, the lowest level since 1995. Early signs, including an uptick in sales in February, suggested this year would be better. Now, no one is sure.
On some corners of the internet, tongue-in-cheek posters have long rooted for a recession, saying they’ll be ready to jump into the market as soon as home prices crater. But what happens to home sales and prices during and immediately after a major stock market decline is more complicated.
With the exception of the 2008 financial crisis, which was caused in part by the housing market, home prices have risen through past stock market corrections and in the 24 months that followed, Morgan Stanley analysts led by James Egan wrote in a note last week analyzing 50 years of data.
Home sales also usually drop during that period and then rebound sharply when the correction ends.
The steepest sales declines typically happen during periods when stocks fall but mortgage rates rise. That’s where the housing market finds itself now. The S&P 500 (^GSPC) has entered correction territory, down 10% year to date and off 14% from its all-time high. Mortgage rates, meanwhile, have risen more than 20 basis points in recent weeks to 6.83%.
Read more: Historical mortgage rates: How do they compare to current rates?
Some level of buying and selling has to persist no matter how high mortgage rates and home prices go, Egan’s team argues. After all, people relocate for jobs or see their housing needs change after big life events like marriage, divorce, births, or deaths.
But the combination of falling stock prices and rising rates “could be an argument for further declines in sales volumes from their already rather anemic levels,” the analysts wrote.
The market volatility has had mixed effects on buying and selling around Seattle, said Jacob Weaver, an agent in Bellevue, Wash., who specializes in luxury properties. Interest has been steady in homes below $1.5 million, and some entrepreneurs who think they can make more money during volatile financial markets are eager to explore purchasing in the ultra-high-end segment. But demand has been weaker for homes between $1.5 million and $3 million — a price point many of the area’s tech workers target.
“There’s a lot more hesitation,” Weaver said. “Buyer decisions in that price range have a lot to do with how people are feeling about their own bank accounts.”
A Redfin survey conducted from April 10 to 14 found that 24% of respondents are canceling plans to make a major purchase like a car or a home due to tariffs, and 32% of those surveyed say they’re planning to delay.
Despite the recent market volatility, homebuying is still fiercely competitive in much of the country. Inventory is still low in many markets, especially along the coasts and in the Midwest, and home prices remain near all-time highs.
In Detroit, Redfin principal agent Desiree Bourgeois said that the tariffs may have slowed down the start to spring selling season, but sellers still maintain an upper hand. Many listings in the area still command multiple offers and sell for over their asking prices.
“I think it shows a lot of confidence in the market, even though there are some wild things going on with our trade wars right now,” she said.
Read more: What is the best time of year to buy a house?
Sara Kronon, a Chicago-based management consultant hunting for a home in the city, is also no stranger to bidding wars. She’s seen properties listed at $600,000 that end up selling for $675,000.
Now, the market volatility and potential for a looming recession have her questioning what she should look for. After initially targeting larger homes, she’s begun viewing smaller one- and two-bedroom options that would come with a lower monthly mortgage payment, with plans to upgrade later when she knows the economy is on firmer footing. At the same time, to hedge against a possible job loss, she’s seeking to boost the income she brings in from side gigs like running an Airbnb in Italy, consulting with prospective international homebuyers, and selling vintage housewares.
“Should I really sign up for a mortgage that’s that expensive?” said Kronon, 37. “Now, I’m rethinking my strategy.”
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