Understanding the Housing Safety Net Amid Economic Uncertainty
The recent announcement of tariffs by the Trump administration has triggered a significant downturn in global stock markets, leading to heightened concerns about economic trajectories. According to Lisa Sturtevant, the chief economist at Bright MLS, this development could result in businesses hesitating to hire and families postponing spending decisions.
For individuals like real estate expert Stella, the fallout from these tariffs may only be beginning. Stella notes that cancelled transactions, such as a deal that fell through last Friday, suggest a growing number of potential homebuyers are reevaluating their readiness to enter the market due to economic apprehensions.
Despite these concerns, Stella maintains that it remains an opportune moment for qualified buyers to invest in property. He stated, “I don’t know a lot about global markets, but I do know that real estate is a safe harbor investment. So if times are uncertain, go buy real estate.” He predicts a steady increase in home values in the Greater Boston area, estimating a 2% to 5% appreciation this year—relative to historical norms before the COVID-19 pandemic.
While Stella’s outlook may resonate with some, numerous factors can influence consumers’ decisions to buy homes. The economic climate created by recent tariffs has led to rising concern regarding job stability and inflation, prompting some potential buyers to hesitate. Nevertheless, the same economic slowdown has resulted in lower mortgage rates, presenting a paradox for consumers poised to buy.
Sturtevant emphasized this contradiction, pointing out that “while the tariffs have led to lower mortgage rates, those reductions may not alleviate the worries of buyers facing job security and inflation concerns.” Whether these lower rates will spur increased real estate transactions remains to be seen.
Mixed Reactions Among Real Estate Professionals
The perspectives among real estate professionals vary significantly depending on regional markets. In Billings, Montana, Brian Huskey, a broker-owner at ERA American Real Estate, reports optimism among buyers who are motivated by the prospect of lower mortgage rates. “I’ve had calls from three or four buyers today who are really excited about rates coming down,” Huskey noted, suggesting that these decreasing rates may catalyze a stagnant market to regain momentum.
Conversely, in Southern California, Michael Nourmand of Nourmand & Associates expresses skepticism. He argues that the prolonged period of interest rates around 6% has acclimated buyers to the current market, leading to a stalemate unless rates drop significantly. Transitioning from lower rates can also introduce additional financial burdens for homeowners contemplating moving costs versus their current lower-rate mortgages.
In the Dallas-Fort Worth area, Mandy Nichols from Brixstone Real Estate has observed significant market changes from the previous pandemic peak. With inventory levels rising and homes remaining on the market longer, Nichols describes the current situation as “weird” and expresses concern over buyer hesitation linked to economic conditions.
Despite the ongoing uncertainties, Mike Pappas, CEO of The Keyes Company, believes that sales will persist, albeit at a diminished pace. He highlights personal circumstances such as “death, divorce, babies, marriages” as unavoidable factors that continue to drive real estate activity.
Impact of Tariffs on New Construction
The consequences of the Trump administration’s tariff decisions extend beyond immediate market fluctuations; they also pose challenges for the construction industry. In Southern California, Nourmand predicts rising material costs will significantly impact new home construction, especially in areas recovering from natural disasters like the Los Angeles wildfires. “The tariffs will make materials more expensive at a time when demand for rebuilding efforts is surging,” he stated.
The escalating costs associated with construction materials will inevitably affect consumers looking to renovate or construct new properties. As demand for land dwindles and construction expenses grow, Stella inverts the trend seen in previous years. He anticipates some homeowners may choose to sell rather than undertake costly renovations, potentially increasing inventory in the housing market.
Stella noted, “The costs of lumber, steel are all expected to go up, and that cost will be passed down to the consumer.” Current estimates suggest builders are quoting homeowners between $700 to $1,000 per square foot for additions, a figure that underscores the financial pressures faced by both builders and buyers.
While the long-term effects of the tariff announcement remain uncertain, some industry experts like Stella see a silver lining—potentially increased market inventory could alleviate some of the strain that buyers currently face.
