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The U.S. housing market remains stuck in a rut that could extend well into next year, challenging a key plank of President Donald Trump's economic agenda to lower the cost of living and and bring down home prices.
Mortgage rates and a lack of new homes on the market remain the main obstacles to unbinding the $50 trillion-plus housing market. The sector has seen record high prices and notably fewer transactions since the Covid pandemic as overall home-buying costs have surged.
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The average rate for a 30-year fixed mortgage, pegged at 6.71%, barely budged last week, the Mortgage Bankers' Association reported Wednesday.
"Markets remained focused on potential trade-policy changes," while the Federal Reserve held the Federal Funds Rate at its current level, the group's chief economist, Joel Kan, said in a statement.
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That's likely a bad omen for lower rates. Federal Reserve Chairman Jerome Powell was pretty clear in his assessment last week that he's in no rush to lower borrowing costs. And the Trump administration's trade policy is likely to include higher building-materials costs and a short supply of construction workers.
Homeowners have no incentive to sell
Owning a home remains a solid investment, with median prices rising 3.8% from a year earlier to a February record of $398,400. But with mortgage rates hovering near 7% and current owners tied to loans at an average of 4%, those owners have little incentive to sell and refinance.
Buying a home is tougher as well. Data from the Federal Housing Finance Agency suggest that a typical family would need an income of $103,850 a year to afford a $400,000 home, up nearly 13% from around $92,150 in 2022.
In addition, extreme weather and climate events, particularly a run of catastrophic storms over the South and Southeast, have sent home-insurance costs spiking. The average annual premium rose 25% between 2020 and 2024 to an average of $2,377 per household.
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The cost of building new homes — adding supply to bring down prices — is also facing headwinds from tariffs on key components such as Canadian lumber, which could face 40% duties as early as next month, and copper, which is expected to see new levies in coming weeks.
The National Association of Homebuilders has said tariffs will add around $9,200 to the cost of a typical new build, which was pegged at around $414,500 last month.