Confidence erodes as buyers fear unaffordable payments and sellers stay locked into low-rate mortgages
An increasing number of Americans are worried that the housing market is headed toward serious trouble, with 70% now fearing a potential crash, according to a new survey from Clever Real Estate.
As the spring homebuying season begins, recent data suggests that consumer confidence in the housing market is deteriorating, a development that could spell trouble for former president Donald Trump, whose economic platform has emphasized lowering mortgage rates, reducing inflation, and improving affordability.
The Clever survey found that 72% of respondents believe US tariffs will hurt the economy, and 81% are concerned about the effects of ongoing trade tensions and potential trade wars. These fears are feeding into a broader sense of unease about housing stability, with 32% of Americans now worried they won’t be able to afford their housing payments due to economic weakness.
“There’s no doubt that the current state of the housing market is a source of anxiety for prospective buyers and sellers,” Realtor.com senior economist Joel Berner said in the report. “Buyers are faced with high mortgage rates, which are poised to remain high due to the inflationary nature of the Trump administration’s trade policy.”
Berner clarified that he doesn’t expect a market crash in the near future, citing continued underlying demand for housing, especially among would-be buyers who’ve been sidelined by affordability issues.
“If home prices did drop, we would expect a flurry of buying activity from the pent-up households in the nation that are waiting to form, which would buoy the market naturally,” he said.
Still, household formation is lagging expectations. According to a Realtor.com economic report, Gen Z and millennial household formation fell short by 1.6 million last year, largely due to the persistent lack of affordable housing.
Recession-era patterns
Although Trump’s tariff policies have reignited market anxieties, most of the public concern appears rooted in longstanding challenges: elevated borrowing costs, limited inventory, and stretched affordability.
In January, total US home sales hovered at an annual rate of 4.7 million, only slightly above the post-Great Recession lows from 2008 to 2010. The sluggish sales pace isn’t due to a recession but rather “adverse affordability conditions,” according to Wells Fargo economists.
“In addition to high mortgage rates, home prices continue to rise,” the Wells Fargo team noted.
Data from the Case-Shiller Index showed that national home prices rose 4.1% in January year-over-year, despite the weak demand. Meanwhile, Fannie Mae’s February Home Purchase Sentiment Index showed growing pessimism, particularly around the direction of interest rates.
Only 24% of respondents said it was a good time to buy a home, while 62% felt it was a good time to sell. Perhaps more concerning: 22% of respondents now expect their personal financial situation to worsen over the next 12 months — the highest share in over a year.
Mortgage rate relief not materializing
Expectations for lower mortgage rates have largely faded. Despite the Federal Reserve beginning to cut interest rates last fall, mortgage rates have remained stubbornly high, hovering between 6% and 7% since September 2022, with the latest average 30-year fixed rate at 6.67% as of March 20, according to Freddie Mac.
A Federal Reserve Bank of New York survey found that households now expect rates to hit 7% by next year and remain that high for at least three years, both record-setting expectations in the history of the survey.
Read next: Fed to slash rates by more than expected as recession risks surge: Goldman
Looking ahead, Realtor.com’s economic team forecasts mortgage rates could fall into the low-6% range by year-end, though Berner warned that “high-6% or low-7% rates are certainly not out of the realm of possibility.”
“Mortgage rates have seriously slowed the housing market,” Berner said, noting that many current homeowners are “locked into the low rates they got a few years ago and are unwilling to move,” which is restricting supply. At the same time, higher rates are “constraining the budgets of would-be buyers.”
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