As we move into the peak of the homebuying season, economic uncertainty is putting a damper on what’s typically a bustling time for real estate. From stock market volatility to shifting tariff policies, prospective homebuyers are feeling the pinch, and real estate professionals are seeing the effects first-hand. With rising mortgage rates and fluctuating investments, many are hitting pause on their dreams of homeownership.
Rising Uncertainty and Hesitation in Homebuyers
Just a few weeks ago, Scott Price, a Los Angeles real estate agent, received an unexpected phone call. A buyer, just two days before closing, decided to pull out of a deal. The reason? Growing fears about the economy, including looming layoffs at the buyer’s company. With no confidence in the stability of their financial future, the buyer walked away, forfeiting a 3% deposit.
Price, who has been in the business for over 20 years, admitted that this was a rare occurrence. “It was definitely unusual,” he said, noting that contract cancellations, though not unheard of, have become more frequent in recent weeks. In fact, data from Redfin shows that between March 17 and April 13, over 14% of home purchase agreements in the U.S. were canceled—the highest rate for this time of year since 2020, when the pandemic froze much of the housing market.
Tariffs and Stock Market Instability: A Double Whammy
Adding to the hesitation, President Donald Trump’s recent tariff announcements have sparked concerns about rising costs for everything from furniture to construction materials. Economists are predicting that this could lead to inflation and even a potential recession later this year. However, many real estate professionals believe they’re already feeling the ripple effects.
Even before the tariff announcement on April 2, the pace of home sales had been sluggish. The National Association of Realtors reported that March saw a 5.9% drop in existing home sales compared to the previous month—the weakest sales rate for March since 2009. Despite hopes that the spring market would bring a rebound, rising economic uncertainty and a stock market sell-off have further disrupted the real estate market.
For first-time buyers, particularly, the volatile stock market has led to even more caution. “Young buyers are particularly wary,” said Maddy Mixter, a real estate agent in Tacoma, Washington. “They’re concerned about the possibility of another downturn, and that’s making them hesitant to sell their stocks or make a big purchase like a home.”
The Impact of Rising Mortgage Rates
As if economic uncertainty weren’t enough, mortgage rates have also seen a significant uptick. The bond market, which directly impacts mortgage rates, has been volatile, with the yield on 10-year U.S. Treasury bonds hitting 4.5% in the wake of the tariff news. This has caused mortgage rates to rise, with the average rate for a 30-year fixed mortgage showing its largest weekly increase in nearly a year.
“Every little increase in mortgage rates can make a big difference, especially for first-time buyers who are trying to get financing,” Mixter explained. Even a small increase in the interest rate can add hundreds of dollars a month to mortgage payments, making it even harder for buyers to afford homes.
Investing in Real Estate Amid Market Volatility
For those who have been saving for a down payment by investing in the stock market, recent losses might have derailed their plans. The Dow Jones dropped by 9.1% in the first three weeks of April, marking its worst performance in April since 1932. This decline has affected many potential buyers’ ability to fund a home purchase, as their savings in the stock market are now worth less.
Financial advisor Douglas Boneparth suggests those looking to buy in the near future may need to reassess their investments. “If you’re planning a short-term purchase, like buying a home in the next few years, it’s wise to make sure that money is not tied up in volatile assets like stocks,” Boneparth advised. “You want to ensure you have the necessary resources when it’s time to make that decision.”
Tariffs and Construction Costs: A New Challenge for Homebuyers
The tariffs introduced on construction materials and appliances have also impacted the decisions of homebuyers considering properties in need of renovation. Matthew Bizzarro, a real estate agent in New York and Westchester, noted that some buyers are now hesitant about purchasing fixer-uppers due to the increasing costs of materials. “People are starting to worry about the cost of renovating, especially with the tariff impact,” Bizzarro said.
Mixter also observed that many first-time homebuyers are shying away from homes that require major renovations. “In general, most starter homes need a little updating, but with the current climate, buyers are looking for properties they can move into immediately,” she explained.
However, some buyers, particularly older ones, are seeing real estate as a safe investment amidst market fluctuations. “They view real estate as a solid investment, especially with the recent stock market volatility,” Mixter noted.
With all the uncertainty surrounding tariffs, stock market instability, and mortgage rates, the spring homebuying season is off to a slow start. For those on the fence about making a purchase, financial experts recommend playing it cautious. As the market continues to adjust, it’s important to be strategic, stay informed, and ensure that your finances are in good shape before making a major investment. Patience may be key—but for many, this season might be a time to pause and reevaluate before taking the plunge into homeownership.
