The Housing Market is Improving, But Buyers Are Anxious

While they show more interest, economic volatility and uncertainty about the future may prevent buyers from pulling the trigger on buying a home. 

Key Points: 

The 30-year fixed-rate mortgage has slightly increased this week, but it continues to move around levels last seen in December. 

An increase in house tours and searches indicate an increase in demand, but it has not yet been translated into pending sales. 

Future buyers may decide on a break because the stock market is falling and fears of a recession raise concerns about their financial future. 

Housing market data continues to indicate better days for homebuyers, but uncertainty about the future may put them aside. 

Mortgage rates were an average of 6.65   percent this week, according to Freddie Mac’s latest survey — a slight increase compared to 6.63 percent last week — but the 30-year interest rate still fluctuates around the lowest levels since December despite recent stock market volatility.  And that should come as encouraging news for potential buyers. 

“The combination of moderately low mortgage rates and improved inventory is a positive sign for homebuyers during this critical home buying season this spring,” said Sam Khater, Freddie Mac’s chief economist. 

Depression concerns may outweigh lower rates 

Still, even as home tours increased, it didn’t translate into more home sales contracts, according to Redfin’s latest market report, which found that pending sales fell by 6.1 percent from year to year. 

“Lower mortgage rates have brought in some home hunters who have been waiting for costs to drop,” said Redfin’s head of economic research, Chen Zhao. “But they haven’t yet led to more sales because potential buyers still understand whether lower payments are enough to justify buying a home in today’s uncertain economy.  Many Americans are concerned about things like job security and a potential recession.” 

Reducing inflation may be short-lived 

Unless the economy weakens considerably, interest rates on mortgages are not expected to fall much further.  The Consumer Price Index report this week showed some inflation relief in February, but it’s not likely enough to cause the Federal Reserve to lower interest rates when it meets later this month.  Since the CPI report was based on data from February – before the Trump administration’s return to and from tariffs – the inflation relief is expected to be short-lived. 

When the tariffs were announced, they were abolished and returned, it is still unclear how this policy will affect inflation. “Rates that do make their way to the books will add to inflation, but we may not see their impact on the CPI for a few months,” said Joel Brenner, the Realtor.com chief economist. 

The stock market is raising concerns 

The stock market turmoil could lead some buyers to delay buying the house.  The Dow Jones Industrial Average fell 1.3 percent on March 13 and has fallen more than 9 percent since December, as investors are still concerned about the effects of federal policy on inflation and the possible recession. 

“The recent stock market slump could slow the housing market further, as potential buyers are watching some of their wealth that they might be using to advance on a vaporized new home,” Brenner said. 

Mortgage requests, demand indices are up 

Although pending sales remain slow, mortgage applications are rising, according to the Association of Mortgage Bankers.  Weekly requests rose 11.2% compared to the previous week, driven mainly by requests for refinancing.  But the purchase requests rose 8% solid and increased 4% compared to a year ago. 

Inventory also continues to rise, with Redfin reporting a 3.1 % increase in new records from year to year.  And demand exists, according to the Radpine Home Buyers Demand Index, which rose 5% compared to a year ago, while Google Home For Sale searches rose 10%. 

Will it lead to more sales left to see?