Overall drop in stock markets, corresponding wealth decline, may cause prices to fall
Outside of a rally on Wednesday, the US stock markets have been down sharply over the last week. With more tariff-related volatility ahead, one mortgage broker thinks that volatility may cause home prices to drop.
Damon Germanides (pictured top), mortgage broker and co-founder of Insignia Mortgage, believes a loss in wealth caused by stock drops may convince some sellers to drop prices to move inventory. The fear of a recession may cause some to want to move property, especially second or third homes and other investment properties.
“I think when you have an uptick in volatility, and that's what we're seeing now, plus it’s been a pretty long time since we've had a recession, and we’re kind of due,” Germanides told Mortgage Professional America. “People might be saying, ‘hey, I want to take some chips off the table.’”
Some gains from Wednesday’s historic rally were lost on Thursday, when the Dow Jones lost over 1,000 points, or 2.5%. The S&P 500 fell 3.46%, and the Nasdaq Composite fell 4.31%.
Germanides thinks the current market drops will cause an overall decrease in prices.
“My feeling is that prices on everything will come down,” Germanides said. “People have less cash and less savings. They’re going to be more hesitant. Assuming you had your home listed for $1 million, and you just took a pretty big loss in the market, behavior is going to change.
“You may say, ‘we might be going into a recession. Instead of a million, I’m going to ask for $925,000 and call it a day.”
Germanides feels it could be the opportunity for houses that might have been overpriced on the market to find a more accurate value, giving buyers a chance to make a move.
“People may want to sell and get something smaller, or move somewhere else,” Germanides said. “I think that will be good for many people who have been waiting to buy homes because they’ve been priced very expensively. That’s assuming that buyers didn’t have their money in the market where they watched their down payment disappear.”
Market volatility may take some buyers out of the market
While Germanides thinks home prices will decrease, some high-value home buyers may have to pause their pursuit of new properties due to a loss in wealth caused by the recent stock decline.
“I was talking to a client looking to buy a second home in Florida, for $2.5 million,” Germanides said. “And he was looking for $3.5 million not too long ago. He called me and said his equity portfolio was down $1 million after the initial declines. Now, he may be down $2 million. So I’m guessing he probably doesn’t want to do anything right now.”
Some buyers have entered the market thanks to a reduction in mortgage rates and a slight decline in overall inflation in March.
The CPI dropped 0.1% from February to March, marking the first decline in three years. Core inflation rose 0.1%. Sam Williamson, senior economist at First American, welcomed the slowdown but warned that ongoing tariffs could push prices up again.https://t.co/XUkSaupyzI
— Mortgage Professional America Magazine (@MPAMagazineUS) April 10, 2025
The Mortgage Bankers Association (MBA) reported a 20% increase in total mortgage applications for the week ending April 4.
Joel Kan, MBA deputy chief economist, said the increase was caused by economic uncertainty, causing rates to drop across the board.
However, some of these rate drops were short-lived, as an increase in the treasury markets has caused rates to increase this week.
Affordability an issue even for people with high-paying jobs
While his company works with mortgages of all values, Germanides typically works with customers with higher-paying jobs. And he’s noticed that even those customers have affordability issues in the current market.
“I’m talking about professionals, like lawyers, doctors, and finance people who make a good, strong living,” Germanides said. “They’re struggling to buy a home. Probably LA is no different than Miami, New York, or San Francisco. Even Dallas has gotten expensive. Trying to get qualified for a loan is a challenge sometimes.”
Germanides feels that a market correction may be in order, and the current market volatility might help make that happen.
“In the last few years, with the existing housing supply, prices have moved up in the bigger markets,” Germanides said. “It’s become quite unaffordable for many people. Normally, when prices outpace affordability by as wide a margin as we’ve had, you would think there would be some reversion to the mean.”
“So maybe housing prices may need to come down a bit to balance things out.”
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