Economic Uncertainty Hits the Real Estate Market
A few weeks ago, a real estate agent from Los Angeles, Scott Price, received a call that only happened once in his two-decade-long career: his buyer retreated two days before closing. The reason seemed to be a growing unrest with the economy. Price’s customer, who was warned by his company that layoffs could come, no longer felt safe enough to make such a big purchase. Instead of taking the risk, the buyer went away from the house – and their deposit of 3%.
A Rare Event
"This is not a frequent event for me," said Price about the cancelled transaction. "It was a very unusual event." Although cancellations for deals may not be common at the price, they occur more often in the USA. In the four weeks between March 17 and April 13, more than 14% of all purchase contracts in the USA were announced, according to Redfin. This is the highest level for this season in 2020 when the early days of the Covid-19 pandemic froze the real estate market.
Economic Fears
President Donald Trump’s temporary approach this month has warned economists that everything, from shoes to furniture, could soon see price increases, and some expect a recession to occur this year. However, real estate agents say that they may already feel the effects of economic uncertainty today. Before Trump’s announcement on April 2 from extensive tariffs, the home building had a slow start in 2025. According to the National Association of Realtors, sales of previously owned houses that make up the vast majority of the market were 5.9% compared to the previous month.
A Weak Housing Market
That was the weakest pace for the turnover of homes in March 2009. Nevertheless, many had hoped that the busy home-buying season this year would be an improvement after the pace of national sales in 2024, but the fears of recessions and a sale of stock exchanges that were eaten to many potential buyer savings accounts increased the disorders in the real estate market. "First-time buyers were a bit hideous," said Maddy Mixter, a broker based in Tacoma, Washington. "I think there is fear whether the markets will recover, and that makes younger buyers even more hesitant to pay out."
Caution in the Market
"I think for the most part people take a step back or are really careful in their moves on the real estate market," she added. Since Trump announced his "mutual" tariffs for all imports to the USA and later initiated a 90-day break for many of the highest tariffs (with the exception of China), stock and bond markets have experienced massive fluctuations. The bond market has a direct effect from the apartment bonds. The mortgage lenses pursue the return of the 10-year financing of Benchmark, which was increased up to 4.5% in the weeks after the first tariff announcement of Trump.
Mortgage Interest Rates
As a result, the average interest rate for a standard fixed mortgage in the 30-year-old permanent mortgage recorded the biggest one-week leap in almost a year last week. "The mortgage interests are a big factor, especially for first-time buyers who really try to really thread the needle of affordability at the moment," said Mixter. "Every tenth of the point is a big deal." Those who may buy a new home by investing in the stock market can be disappointed with the recent performance in their portfolio: the Dow fell 9.1% in the first three weeks, the worst performance of index since April since 1932.
Advice for Potential Buyers
At a time when someone’s finances – or career prospects – are in flux, Douglas Bonssparth, certified financial planner and founder of the asset company Bone Fide Wealth, advises to wait for a new home to work. "It is a case to a case," he said. "It can be out there to individuals who have strong savings regardless of uncertainty or feel in order with regard to their work." For those who want to buy a new home in the near future, Bonssparth suggests being more conservative with investments and ensuring that savings are not only invested in shares.
A Shift in Buyer Behavior
However, there is another way that the Trump government’s trade policy already affects the spring home market. Customs for imported construction goods and devices have changed the calculation for buyers who want to buy fixer-upper houses, said Matthew Bizzarro, a broker who mainly works in New York City and West Chest, New York. "The main conversation I heard about tariffs are people who buy places who have to be renewed lean," said Bizzarro. "Some got concerns about the renovation of the goods, and that creates a break." Mixter, the real estate agent in Washington, also said that many of their first-time buyers no longer consider houses that require renovation work.
Outliers in the Market
"Classically, starter homes need a bit high," she said. "But I saw many first-time buyers who really look carefully with houses that they could simply move … only because of the climate and uncertainty what happens." However, there are some outliers. Mixter said her office was interested in real estate purchases from some older homeowners who recently redeemed some stock stocks in the middle of market contracts. At the moment, you see real estate as a solid investment alternative, she said.
