The U.S. housing market is facing heightened uncertainty, according to a recent Bank of America (BofA) survey. Rising mortgage rates and elevated home prices have led to a growing sense of indecision among homeowners and potential buyers. In a poll of 2,000 respondents, 60% of participants indicated they were unsure whether it was a good time to buy a home, marking a notable increase from 57% last year and 48% in 2023. This growing uncertainty comes as mortgage rates and home prices remain volatile, creating hesitation in a traditionally active spring season.
Rising Mortgage Rates Fuel Market Hesitancy
Bank of America’s head of consumer lending, Matt Vernon, noted that the ongoing volatility in mortgage rates and high home prices have slowed down the pace of home purchases this spring, typically a peak season for real estate activity. “We’re certainly off to a slower start, from a spring season perspective, than we’ve historically seen,” Vernon told Reuters. The decline in market activity stands in stark contrast to the first quarter, where an 80% surge in mortgage applications was recorded, as buyers were attracted by an increase in home inventory and falling long-term bond yields.
Economic Concerns Drive Slowdown
The sluggish start to the spring housing market can be attributed to broader economic uncertainty, which has led to reduced consumer confidence. Concerns over interest rates, the Trump administration’s economic policies, including tariffs, and the nation’s fiscal outlook have played a significant role in increasing market volatility. According to Kara Ng, a senior economist at Zillow, despite improved affordability and more options for buyers, overall sales fell due to macroeconomic uncertainty. “Many households didn’t know what was next for their jobs, investment portfolios, or budgets,” Ng explained.
Buyers Hold Out for Lower Rates and Prices
While many buyers remain on the sidelines, the BofA survey did show some optimism. About 52% of prospective buyers believe that the market is in a better position now than it was a year ago. However, three out of four respondents indicated they are waiting for home prices and mortgage rates to fall before making a purchase. This represents an increase from 62% in 2023, suggesting that many buyers are holding off in anticipation of more favorable conditions. Vernon pointed out that the current mortgage rate range of 6% to 7% has become a “new normal,” with buyers hoping for a better deal in the near future.
The Long-Term Outlook for the Housing Market
As uncertainty continues to cloud the housing market, both prospective buyers and homeowners are left waiting for more stable conditions. While some expect the market to improve with lower interest rates and home prices, others remain cautious due to ongoing economic turbulence. The trajectory of the U.S. housing market will depend heavily on how macroeconomic factors like inflation, government policies, and global trade tensions evolve. As of now, many buyers seem content to wait for the optimal moment to enter the market.