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As chief economist for NewHomeSource, Ali Wolf manages and analyzes content for Zonda, runs special research projects and strategizes with the nation’s largest homebuilders.
As a featured speaker at Inman Connect San Diego, she’ll provide insights into economic factors, buyer behavior, and how market shifts are impacting consumers.
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Wolf took the time to talk to Inman in advance of her July 31 Connect appearance. While mortgage rates and affordability present challenges for homebuyers, she said, uncertainty can be the biggest issue for many — and that’s something real estate agents can help their clients cope with. This interview has been edited for clarity and brevity.
Inman: I’m guessing you probably have a lot of data that you’re looking at. Everybody’s got their own local market, but talking just about the national market, is there anything that you’ve seen recently that stands out?
Ali Wolf: The one thing that I feel most comfortable saying about the national market is that across almost every geographic area, across almost every price point, we are in a housing market today that lacks any sense of urgency. There’s people that maybe want to buy, or can buy, that are just choosing not to. The consumer is fully steering the market today, and their uncertainty about broader things in their lives is resulting in a lot of uncertainty in the housing market.
In the past, rent versus own was kind of a coin toss. It depended on how much you could put down, and interest rates. What is happening now, almost everywhere across the country, is that renting is the obvious choice if you just look at the monthly housing cost. So it’s becoming a market where the dynamics look a lot more complicated and a lot more messy than what they have in the past.
How can real estate agents help their clients get some clarity?
There are going to be certain buyers that will be priced out. But those that could still potentially buy, they’re going to say, “Hey, if I rent, it’s $1,500 a month. If I buy, it’s $1,800 a month. I don’t want to buy because I don’t want to pay that extra money.”
Not everyone should buy, but this is where our industry should say, “What else happens when you buy a home? Well, now you’re starting to invest in yourself. Now you’re paying down your mortgage, now you’re setting yourself for retirement in the future. You’re no longer worried about what your rent increase is going to be, because you’ve now locked in the largest share of your monthly budget.”
If you look at renters versus homeowners, owners have nearly 40 times the wealth of renters. So there’s going to be the immediate objection, which is, “Why would I buy?” But then there is the logic of why you might still want to.
The advice from a lot of real estate and financial professionals is “Don’t try to time the market.” But what would you say to a buyer is thinking, “Well, maybe next year will be a better time to buy.”
People try to time the market when, at the end of the day, it’s time in market that matters. You want to be invested, and paying off that investment as soon as you can, versus trying to save 3 percent or 5 percent on the home price. That is not going to matter 10 years from now. But what you’ve invested in yourself over that time becomes more valuable.
I also would say that you can try to time the market, but you have no idea what’s going to happen in 3 years. Home prices could go down but interest rates go up. You could see interest rates go down but home prices go up. I just think there are too many unknowns.
When you look at consumer sentiment surveys, there’s a lot of uncertainty about what tariffs will mean for the economy. Unemployment has been creeping up, and consumer sentiment has been pretty dismal this year.
Let’s go back to trying to time the market. Let’s say next year, home prices start to come down and interest rates start to come down, but then everyone that’s trying to time the market time tries to come into the market at the same time. So now you’re competing with more people.
But then there’s an extra layer with tariffs, if they go through as discussed, tariffs are taxes. Taxes mean higher costs. Homebuilders, for example, are still building on some supplies that they bought pre tariffs, so their costs are not as bad. If you wait, maybe the building material costs go up, and so a builder maybe wants to lower their price, but they can’t. And then where are you?
Many existing homeowners are feeling the mortgage lock-in effect — they don’t want to sell because they don’t want to give up the low rate on their existing mortgage — and there are affordability issues in many markets. What needs to happen to bring home sales back?
The lock-in effect is one reason why we’ve seen the new home market do better, because builders can basically solve for it (by offering interest-rate buydowns and other incentives). New homes and resale homes are selling at about the same price, and new homes are offering a lot of incentives. So when given the same choice that consumers had in the past, new or resale, more people are saying a new home makes more sense.
I think time heals all wounds. Over time, the mortgage lock-in effect becomes less dramatic. If I bought a house when I was single, and I locked in a 3 percent interest rate, and then I get married and now I have two incomes, I may be in a position to move.
To see a meaningful rebound in the market, though, I think one of the most important things is consumer confidence. I think stability is the most important factor. People can adjust to higher interest rates. They can compromise on where they want to live, on certain aspects of their home. What they can’t adjust to is constant uncertainty and volatility. That will push people to the sidelines.
Obviously if interest rates came down, if home prices came down, if supply went up, if wages went up, those are all factors that could also help with the housing market.
Any predictions on the likelihood of those things happening?
You will not hear me on record forecasting mortgage rates today. There are so many moving parts.
I think the one that seems most likely is that we do see more supply. We’re already seeing that. Now, more supply can be a little bit challenging, because it can result in pricing coming down. But if we’re talking about how do we get some balance in the market, I do think more supply and a little bit of a downward pressure on pricing actually can be helpful to keeping the market moving in.
We calculate that at least 4 million homes will be sold in 2025, even as the housing market feels slow, even as the housing market feels bumpy.
That’s 4 million sales that are up for grabs. So it really becomes how do you capture your share? The pie is smaller, but if you can capture a little bit more of the share, you can still have a thriving business even in a bumpy market.
