Homebuyers stay on sidelines amid rate uncertainty

[UNITED STATES] Despite a modest rise in housing inventory, US homebuyers remain on the sidelines, caught between elevated mortgage rates and economic uncertainty. A new Bank of America survey shows optimism for the future—but not enough to spur purchases today. Understanding this pause in buyer behavior sheds light on a broader shift in consumer confidence and spending priorities heading into 2025.

Key Takeaways

• High mortgage rates remain the biggest barrier to homeownership, dampening demand even as housing supply improves.
• Homebuyer confidence is mixed: over 50% say conditions are better than last year, but most are still waiting to purchase.
• 75% of potential buyers expect mortgage rates and home prices to improve within the next year.
• Affordability concerns dominate, with inflation and high home prices delaying purchasing plans.
• The Bank of America 2025 Homebuyer Insights Report reveals a cautious optimism, with many buyers in “wait and see” mode.

Comparative Insight

This standoff between buyers and the market recalls the post-2008 recovery, when consumer sentiment took years to catch up with improving macro conditions. Today’s backdrop is different: unlike the foreclosure-driven glut of the past, current inventory growth is modest and unlikely to trigger price collapses. Compared to Canada or the UK—where rising rates have prompted faster market corrections—US housing remains more resilient but less flexible, owing to its reliance on 30-year fixed-rate mortgages that discourage sellers from listing.

Meanwhile, inflationary pressures in sectors like energy and insurance are diverting disposable income away from long-term investments like homeownership, further distinguishing this cycle from previous ones.

What’s Next

If inflation cools and the Fed begins rate cuts in late 2025, we could see a gradual thaw in buyer demand. But even with more listings, affordability will remain strained unless wage growth outpaces inflation. For first-time buyers especially, the hurdles are stacking: student debt, high rent, and tight lending standards continue to limit options.

Builders may find new openings in the starter-home segment, and mortgage lenders could begin marketing more aggressively once rate cuts become visible on the horizon. For now, the market is stalled—not collapsing, but not surging either.

What It Means

The housing market is no longer just about supply and demand—it’s a barometer of consumer psychology. This prolonged pause in homebuying reveals deeper anxieties about financial stability and long-term economic direction. Buyers aren't retreating permanently; they’re recalibrating expectations, waiting for clearer signals.

If 2025 brings rate relief without a surge in inflation, demand could snap back quickly. But until then, housing may serve as a cautionary tale of what happens when affordability, policy, and perception collide. For policymakers and investors alike, this isn’t just about homes—it’s about confidence.