What had been shaping up to be a blossoming spring housing market is now wilted.
A slew of data about home sales, mortgage rates and consumer behavior were released in the last several days and taken together, the figures painted a gloomier-than-expected picture of where things stand.
Experts gave varied, nuanced explanations for the downturn, but there was one common denominator: tariffs.
At the beginning of April, the White House announced a slate of taxes on imports to the United States. It has since reneged on some of those original tariffs, but even so, trade with many of the country’s biggest partners has gotten more expensive. That’s stirred uncertainty as consumers and businesses alike navigate higher prices in an ever-changing policy environment.
It’s important to note that while the data is reflected in those decisions, much of the data comes at a lag. In other words, it will take time before the full effects of the tariff policy are felt in the housing industry, and it could get worse before it gets better.
Here are the biggest takeaways from the past several days and what the data tells us about the future of the housing market.
Insiders are wary of new home sales
In March, the sale of new houses in the United States was 7.4% higher than the previous month and 6% higher than the same time last year, according to data released by the U.S. Census Bureau and the Department of Housing and Urban Development.
At March’s rate, 724,000 new homes would change hands over the next 12 months.
But analysts and economists warned the tide could change quickly, especially as homebuilders follow through on their promises of higher prices in response to tariffs.
“The stronger pace of sales registered in March is [an] encouraging sign that the new home market was not falling apart ahead of the new tariffs and associated market volatility," Wells Fargo said in a report released Wednesday. "Moving forward, however, significantly reduced policy certainty, the recent bounce in mortgage rates and dimming economic growth prospects stand as formidable headwinds."
Existing home sales fell to their lowest level since March 2009
Sales of pre-owned single-family homes and condos fell 5.9% in March from one month earlier, according to the National Association of Realtors. At that pace, 4.02 million houses would trade hands in a 12-month period.
It’s the lowest pace of sales since March 2009 — during the Great Recession — and it’s the steepest month-to-month decline since November 2022.
At the same time, the supply of houses on the market rose in March. Compared to the same time a year earlier, there is an almost 20% increase in inventory. Still, that wasn’t enough to lure buyers into the market.
Economists at the NAR and Wells Fargo blamed mortgage rates.
“March's pullback largely reflects ongoing affordability challenges for buyers, in particular the relatively high mortgage rates which prevailed in January and February, when buyers first went under contract,” according to a Wells Fargo report. “Although buyer financing costs temporarily dipped lower in March, mortgage rates have jumped back to near 7% in April alongside recent financial market volatility.”
“It’s a little disappointing, because [earlier this year] we thought we saw a light at the end of the tunnel,” Lawrence Yun, chief economist of the National Association of Realtors, said in discussing the data.
Volatile mortgage rates are pushing buyers to the sidelines
If the effects of tariffs have been immediately visible in any dataset, it is mortgage rates.
The last few weeks have been a rollercoaster as rates have bounced between months-long lows and months-long highs.
As of Thursday, though, mortgage rate averages had decreased slightly on a weekly basis. The 30-year, fixed-rate mortgage eased to 6.83% while the 15-year, fixed-rate mortgage dipped to 5.94%.
Even so, mortgage rates are much higher than they were earlier this year, and that’s keeping buyers at bay, a trend that’s expected to continue.
“With rates now close to 7 percent, many potential borrowers will likely stay on the sidelines until they have a better idea of the direction that rates, and the economy, are headed,” according to Bob Broeksmit, CEO and president of the Mortgage Bankers Association.