No one likes uncertainty, not stock investors and certainly not homebuyers. Nevertheless, here we are, six months after devastating storms and facing another, what appears to be active hurricane season. Just as homes and psyches are getting back to normal, in rolls the biggest storm of all, tariff policies.
Nationally, buyers started gliding back into the housing market after two years of chronic slow sales. Showings for the week ended April 6 were up 39% from early in the year, outpacing the same period last year per Zillow. This was in spite of mortgage rates not moving off of the mid 6% range. Then comes tariff “reform.”
As it is, we on Florida’s west coast can’t seem to catch a break. Economic anxiety and extreme stock market volatility are destabilizing and confusing threats to the housing market on top of an already nervous housing market fueled by the storms. All of this makes potential buyers rethink their decisions.
A slowing economy raises fears of job security and investment security. If the negative effects of tariffs continue, it could put some pressure on the housing market and 2025 could be the third straight year of lower significant home sales. According to the National Association of Realtors, February pending home sales declined 3.6% from the same month in 2024, which is the weakest year for home sales since 1995.
Keep in mind that lower home sales do not always translate to lower selling prices, but if the trend continues, lowering prices could be a likely result. We as a country have a lot of equity in our homes starting during the pandemic years and not leveling off substantially. Home equity has climbed nearly 80% since early 2020 thanks to the extraordinary rise in house prices. According to the Federal Reserve, that was about twice the rise in financial wealth including stocks and bonds as of the end of 2024.
This benefits all homeowners’ buyers and sellers alike. But the difference is that so many homeowners refinanced when the Feds slashed interest rates during the pandemic that nearly three-quarters of households with mortgages now pay 5% or less on their mortgages, giving them very little incentive to sell.
In addition, accruing equity and wealth in your home comes with another set of increasing expenses. Since a large portion of property tax is based on the assessed value of the property, the higher the assessment, the higher the taxes. Not all states have a cap on property taxes like Florida has for full-time residents, so if you’re not a full-time Florida resident or if you live in a state where taxes are not capped, you probably have had a large increase in property taxes over the past several years.
Another high financial expense that has increased is the cost of insurance and HOA fees for condos and even some single-family properties. Sometimes insurance goes up because the value of the property is higher, certainly a good thing. HOA fees are also impacted by insurance costs and specifically in Florida, the age of the condo.
And when you finally do sell, be prepared for capital gains tax, which could be a shock to the system if you are fortunate to have a lot of equity. The IRS has not increased the amount you can exclude from capital gains despite the huge amount of value accrued in our homes. It’s still $500,000 for married couples filing jointly and $250,000 for single filers, less expenses.
Owning a home has always been a sure-fire path to wealth, and I believe it still is and will still be the best investment you’ll ever make. But there are unknowns out there hovering over us and one starts with a big “T.”
