Over the past few years, homebuyers have faced a stagnant housing market riddled with high prices and low inventory. Mortgage rates doubled when inflation surged in 2022, and skyrocketing home prices have locked many would-be buyers out of the market.
When the Fed began cutting interest rates in September, most forecasts predicted that mortgage rates would fall below 6% in 2025. However, new developments show it will likely take several more years for rates to stabilize and housing market activity to reset to previous levels.
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Economic and political uncertainty are the driving forces behind sticky mortgage rates, which are likely to linger amid rising inflation expectations and pending trade wars. As unpredictability continues, the housing market gridlock persists.
Real estate expert and Shark Tank veteran Babara Corcoran has a bold take on what a housing market fueled by uncertainty means going forward.
Barbara Corcoran has blunt words on how uncertainty will impact the real estate market long-term.
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Uncertainty dampens housing market confidenceÂ
Buying a home is one of the biggest financial commitments most Americans will ever make. Consumers become more hesitant to make a big purchase when the economy is uncertain and the risk of unemployment and financial strain is heightened.
An impending economic recession could make matters worse for an already sluggish housing market. In 2024 housing sales reached record lows not seen since 1995, and although there was a 2% improvement in Q1, Realtor.com estimates that overall sales will remain tepid in 2025.
Recessions do typically lower mortgage rates, as investors seeking “safe” returns flock to treasury bonds and the 10-year treasury yield decreases. However, an economic recession would increase uncertainty and stifle consumer confidence, likely negating any progress that lower mortgage rates might bring to the housing market.Â
Corcoran explains why uncertainty could be the worst thing for the housing market right now.
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“There’s great uncertainty, and that’s bad for business. Uncertainty makes people pause, which is a problem,” she said.
“The suppliers of homes in America — with seven million homes short — are now hoarding lumber because they’re afraid of the tariffs,” Corcoran continued. “People are uncertain; they don’t know what to expect next, and uncertain people don’t move forward.”
High mortgage rates deter sellers, keeping inventory low
Mortgage rates and housing supply are linked, as sellers with competitive mortgage rates lose the incentive to list their homes when mortgage rates are high.Â
An increased housing supply could reignite housing sales by giving buyers more competitive prices and negotiating power. However, sellers are unlikely to list their homes en masse while rates are far higher than the average homeowner’s mortgage.
Related: Barbara Corcoran has blunt words on mortgage rates, 2025 housing market
“A lot of people are excited about the housing prices slowing down, but it’s less than a quarter percent, and that doesn’t provide a lot of relief for people,” Corcoran told Fox Business.
“The real problem is interest rates are holding people back, of course. More than two-thirds of Americans have 4% interest rates,” she explained. “Why would you sell your house? Why would you move? You have a 4% rate. That’s really the blanket holding.”
Economic stability may be one of the best antidotes to the housing slump, prompting cautious homebuyers to get off the sidelines and join the housing market.
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