Fresh data indicates that the real estate market has remained stagnant at the beginning of the year, posing significant challenges to President Donald Trump’s efforts to revitalize it. Existing home sales dropped by 4.9% from December to January, a larger decline than anticipated, as reported by the National Association of Realtors on Friday. Although there was a slight improvement of 2% in sales compared to last year, the overall sales pace continues to linger near 15-year lows.
The situation is not much brighter for new constructions either, with construction permits decreasing by 1.7% in January compared to the previous year, and housing starts remaining relatively flat, according to federal data released on Wednesday. The latest survey by the National Association of Home Builders revealed that confidence among homebuilders hit a five-month low this month.
Additionally, purchasing a home had become increasingly challenging towards the end of 2024 due to economic uncertainties, rising costs, and a shortage of available homes in the market, according to the NBC News’ Home Buyer Index. These challenges vary county by county, making the home buying process even more complex.
The current market conditions are a result of the convergence of ongoing issues such as limited inventory, high prices, and elevated interest rates, combined with new uncertainties stemming from Trump’s economic policies like tariffs and potential mass deportations, which could drive up costs.
Chief economist at Bright MLS housing group, Lisa Sturtevant, commented on the unusual start to 2025, noting that many buyers and sellers were optimistic about the year ahead. However, she highlighted that listings are lingering on the market longer as buyers wait for mortgage rates to decrease, anticipating a slower spring season than originally expected.
During his campaign, Trump pledged various measures to stimulate the housing market, including mass deportations to free up properties, deregulation to encourage development, and tax incentives for first-time homebuyers. He also promised significant reductions in mortgage rates. However, mortgage rates for 30-year fixed loans have remained between 6% and 8% for the past two years, with recent demand for mortgage applications hitting a six-month low.
Since the election, major builders have expressed concerns about Trump’s proposals potentially impacting their businesses. The impending tariffs on steel and aluminum, along with those on Chinese goods, are expected to raise costs for home construction. Industry executives warn that these tariff increases could add thousands of dollars to home prices.
During a December investor meeting, co-CEO Jon Jaffe discussed the uncertain impact of potential changes in immigration policy. Some economists believe that stricter immigration enforcement could hinder construction, drive up home prices, and lead to job losses for American-born workers in the industry. Home builders expressed concerns about the possible effects on their predominantly foreign-born workforce, already experiencing shortages. The recent surge in arrests and deportations by the new administration has faced resource limitations, causing frustration for the president.
The White House spokesperson highlighted the president’s efforts to reduce housing costs and increase supply through executive actions, aiming to address the housing crisis. Amid the housing market uncertainties, Redfin’s Chief Economist suggested that buyers consider new construction options with incentives from developers. While housing inventories are increasing, they remain below the six-month level considered balanced.
Despite a rise in delisted homes and an increase in new homes for sale, existing home supply remains low. However, analysts noted a positive trend with more single-family homes on the market compared to the previous year. Buyers are advised to monitor mortgage rates and secure preapproval for loans, enhancing their negotiating power.
Real estate agents in competitive markets are cautiously optimistic, noting fluctuations in buyer preferences and market uncertainties. The upcoming spring buying season is anticipated to be more active, barring unforeseen events. Both buyers and sellers in the housing market are facing challenges, from limited inventory to high renovation costs impacting affordability and decision-making processes.
“Chicky Johnson, a seasoned Re/max agent with over thirty years of experience in the Chicago suburbs, advises clients to remain patient if the selling process for their home seems to be taking longer than expected. She notes that the current market is in a state of transition, with a hint of stabilization on the horizon.
Johnson acknowledges the unpredictability of tariffs as a potential challenge in her efforts to help clients find new homes this year. Despite facing a slight decline in sales towards the end of last year, she attributes this in part to a significant settlement that disrupted commission regulations and increased incentives for buyers to navigate transactions without the assistance of brokers.
On a more positive note, Johnson observes a shift in the mindset of both buyers and sellers who have grown weary of waiting for mortgage rates to decrease. This impatience has led to a shift in the market dynamic, moving away from a landscape dominated by limited inventory and high demand which often resulted in multiple-offer situations characterized by overbidding.
Now, Johnson believes there is a sense of balance emerging in the market, as buyers and sellers alike are beginning to take action rather than remain in a state of indecision. This shift represents a turning point in the real estate landscape, indicating a ‘coming-to-grips’ with the current conditions.”
