The sluggish housing market isn't entirely bad news
Add Axios as your preferred source to
see more of our stories on Google.
Your shares have fallen sharply in value over the past few weeks, as has your bond portfolio.
- But the biggest source of wealth for middle-class U.S. households is real estate — and broadly speaking, that seems to be holding up.
Why it matters: The housing market has been mired in a doldrums for the past 18 months, with very few houses changing hands. That weirdly makes it something of an outperformer among asset classes more broadly.
The big picture: House prices — and therefore the amount of equity that Americans have in their homes — continue to hit new highs pretty much every month.
- "That could be a reason why this trade war hasn't resulted in weaker consumption right now," Redfin chief economist Daryl Fairweather tells Axios.
- "Homeowners still feel comfortable enough spending money on all these other goods because they hold that equity."
Driving the news: Existing home sales fell 5.9% in March from February, after seasonal adjustments, the National Association of Realtors said on Thursday.
- Home sales have now been running at an annualized rate of about 4 million units per month since the beginning of 2023 — an unprecedented length of time for that number to be so low.
- On the other hand, the median home price rose by 2.7% from March 2024 to $403,700 — the 21st consecutive month of year-on-year increases.
Where it stands: March marks the beginning of the home-sales season, which runs through the end of the summer. This year is looking inauspicious, since mortgage rates remain high (last seen at 6.8%, per Freddie Mac), and economic nervousness is peaking.
- "We've heard from our agents that clients have lost their down payment in stock market, or at least a good chunk of it, so they're pausing home buying because they don't have the money that they thought they did," says Fairweather.
- "Buyers and sellers are not on the same page yet. The sellers are still listing at prices that are too high, and the buyers, with high mortgage rates, cannot afford what sellers are asking."
- Also contributing to buyer nervousness: Significantly higher homeowners' association and insurance costs, especially in Florida.
Between the lines: More motivated sellers — including homebuilders — are finding it easier to sell just by cutting prices.
- The March new home sales data released on Wednesday by the Census Bureau saw a rise of 7.4% versus February and 6% versus a year earlier.
- That's partly because prices are falling — down 1.9% on the month and 7.5% from a year ago.
The bottom line: Housing could be the safest investment in America right now — if you assume that a recession would result in lower mortgage rates and therefore greater affordability.
