T
he real estate market is in a state of stagnation, with homes sitting on the market for weeks or months and major price reductions. Would-be buyers are hesitant due to high mortgage rates, stagnant sales, and the shift back to office work. Federal Reserve Chairman Jerome Powell's actions will determine whether the market recovers.
Existing-home sales dropped 2.7% in June, while new-home sales barely budged at 627,000 annualized, still 6.6% below June 2024. The phenomenon of "golden handcuffs" is occurring, where people are stuck in their homes due to financial instability and unemployment rates hovering near 4.3%. Many had dreamed of working from home but were recalled to the office.
Inventory is technically up, with active listings rising 24.8% year-over-year in July, but affordability remains the issue. In Sun Belt markets like Austin or Miami, price collapses are underway, yet buyers aren't flooding in due to increased insurance and property costs. Rising homeowners' insurance premiums have become a new normal.
The average 30-year fixed rate mortgage was 6.58% this week, the lowest level since October 2024, but still not low enough to unlock affordability for many households. Industry forecasts said 6% rates could enable 6.2 million households to afford a median-priced home, but even if rates fall to that benchmark, deeper issues remain.
Powell can spur a chain reaction to start the spin cycle of a lower interest rate environment in America, which Americans need more than anything right now. During recent congressional testimony, Powell argued that lowering interest rates wouldn't reduce housing costs, citing a long-term supply shortage as the source of elevated prices. However, this narrative is aggressively flipping, and reality shows that some people aren't moving due to rising job uncertainty and unwillingness to leave their 3% mortgage rate.
In many countries around the world, including Italy, France, Spain, Ireland, and Germany, mortgage rates are sub-4%. The inventory level as of July was over 1.1 million, reverting back to pre-COVID levels. It's time for Powell to stop pontificating about when to lower interest rates and start acting. If he doesn't, Americans will be a day late and much more than a dollar short.
