Real estate: Will spring be a buyer’s market?
Just as it was starting to look like the housing market had turned a corner, the conflict in Iran is “chilling the spring home-buying season,” said Andrew Keshner in MarketWatch. When the average 30-year fixed rate finally dipped below 6% in late February for the first time since September 2022, economists began projecting that the housing market “could be busy after years of sluggish home sales.” That optimism, however, was short-lived. Mortgage rates—which are set by lenders based on “the yield on the 10-year Treasury note”— skipped back above the 6% threshold shortly after the U.S. bombed Iran, ending a downward trend. Now there’s also uncertainty about the lasting impact of the war, which could affect “the willingness of would-be buyers to make a major financial decision.”
That’s a big loss, said Rukmini Callimachi in The New York Times, because the market was finally “tilting back toward buyers.” For years, buyers were the ones courting reluctant sellers “like star-crossed lovers in a Hollywood rom-com”—making offers above asking price, even waiving inspections. Eventually, many buyers simply gave up, and now there are “47% more sellers than buyers” nationwide, the largest such gap since Redfin began collecting data in 2013. This supply/demand imbalance could begin to help lower prices. The median U.S. home price is still at a record $405,000, said Julie Z. Weil in The Washington Post. That “has prompted cities, states, and nonprofits to expand eligibility” for some down-payment assistance programs to include even middle-income households. San Francisco, for instance, now offers interest-free loans of up to $500,000 to first-time homebuyers making up to $218,200 annually.
At 6%, mortgage rates are still out of reach for many people, said Annie Lowrey in The Atlantic. Data from the Mortgage Bankers Association “show that Americans are applying for fewer mortgages than they have at any point in the past quarter century.” This is a troubling trend. Homeownership is the best path to the “long-term financial security of the American middle class” and has been “a cornerstone of wealth building.” If young and working-class people aren’t “getting on the property ladder anymore,” they will end up “poorer in retirement than their parents.” Not being able to afford a home is a “broader problem for society,” said economists Younggeun Yoo and Seung Hyeong Lee in Bloomberg Businessweek. As the dream of home- ownership fades for young renters, research shows that they “systematically shift their behavior.” They decide to live closer to their means, work less hard, and choose riskier investments, such as cryptocurrencies. “Perhaps these renters are hoping to gamble their way back into the housing market,” but “giving up” on a house “can lead to enormous gaps in lifetime wealth.”