Housing v. Consumer
Often, we isolate the real estate market as its own entity, but it is closely tied to that of the general consumer.
With a record $1.21 trillion in credit card debt, 24% of Americans are shelving homebuying plans, and 32% are delaying other major purchases.
The Miami and West Palm Beach markets are experiencing the longest average days-on-market since 2020, yet we are still contending with bidding wars along coastal New Jersey.
Make it make sense.
In short, high cost-of-living areas are being hit the hardest as Americans shift focus toward value.
For strategic buyers, this could present a unique window of opportunity.
I am not saying that every seller will accept a low offer - but I am saying that the deals are out there, if you know where to look.
Tariffs & Housing
A baseline 10% tariff was imposed on imports from nearly all countries, except for Canadian and Mexican goods that comply with the United States-Mexico-Canada Agreement (USMCA). Thankfully, most major construction inputs (84% of soft woods come from Canada, 70% of concrete and gypsum come from Mexico) are excluded from these tariffs.
The American Association of Home Builders has been projecting price increases from $9,000-11,000 per home, but most of the large homebuilders do not expect to increase prices. To me, it seems that unscrupulous entities are praying on consumer fear in a greedflation capacity, whereby they are arbitrarily raising prices despite no increase in actual costs.
Thus, the biggest potential tariff impact on the housing sector might not be direct construction inputs; instead, it could depend on how tariffs end up affecting the broader economy, interest rates, and housing demand.
The uncertainty has translated into mortgage rates, as well. We were hovering between 6-6.5% on the 30-year, but when 10-year treasuries jumped last week, it drove the average 30-year mortgage up to 7% again.
Different Realities
I think of the housing market as three tranches: ‘Entry Level’ (sub $1 million), ‘Keeping up with the Jones’ ($2-$7 million), and the ‘Anti Herd’ ($10 million+). Each is experiencing a different reality…
The sub-$1 million market has remained strong, especially in areas whereby cost of living is more affordable. This sector of the market is not as exposed to the stock market fluctuations, except in 401Ks.
The $2-$7 million market, aka Keeping up with the Jones sector, has been the hardest hit. This group is dependent on both loans and income from stock portfolios.
The $10 million+ Anti-Herd buyer has remained resilient as this sector looks at volatility as opportunity.
