While the stock market edges near record highs, the housing market tells a very different story — one marked by historic lows in home sales, rising construction costs, and growing unease among buyers and sellers alike, Axios reports.
Pending home sales — a key forward-looking indicator — rose 1.8% in May from the previous month, according to the National Association of Realtors (NAR). Yet despite the modest uptick, activity remains near its lowest point in two decades, rivaled only by the brief pause in home sales during the initial COVID-19 lockdowns in 2020.
Existing home sales in May also fell compared to the same month last year, reaching their slowest pace since 2009, when the US housing market was still reeling from the financial crisis.
At the same time, housing starts — the number of new home construction projects — declined by nearly 10% in May, the weakest figure since May 2020. This suggests that home builders are pulling back amid concerns about future demand and rising input costs.
Industry experts say that economic uncertainty, rather than mortgage rates alone, is driving the downturn.
“It’s less about mortgage rates, and more about the job market and confidence,” says Eric Finnigan, vice president of demographics research at John Burns Real Estate Consulting.
High home prices and rising rates have made it difficult for many would-be buyers to enter the market. Meanwhile, existing homeowners who locked in low rates before 2022 are reluctant to sell, clinging to rising home values that they see as untapped equity. Finnigan refers to this phenomenon as a new form of “golden handcuffs” — a disincentive to move or negotiate on price.
Even with a slight rise in pending home sales, uncertainty still looms.
“The bottom in home sales appears to be over,” said NAR Chief Economist Lawrence Yun, “but higher-than-normal cancellation rates and last-minute cold feet remain a concern.”
The housing market is also facing external challenges, including tariffs on building materials and workforce disruptions. According to a survey by real estate data firm Zonda, some home builders have reported that Immigration and Customs Enforcement (ICE) visits at job sites are discouraging worker attendance, even among those with legal status.
This disruption compounds existing labor shortages and contributes to delays and rising costs in residential construction.
“The housing industry is already riddled with challenges,” said Ali Wolf, Zonda’s chief economist. “And I don’t think we realized how many more we were going to face this year.”
