Despite early 2025 optimism for a housing market rebound—driven by easing inflation, a strong economy, and falling mortgage rates—the US market took a downturn after President Trump’s surprise global trade tariffs in April triggered financial volatility and pushed mortgage rates back up. This spooked buyers, who began backing out amid recession fears, while sellers remained reluctant to lower prices, resulting in a stalled market. Even in cities with falling prices and rising inventory, homes are sitting unsold.

Many homeowners are locked into ultra-low mortgage rates from prior years, discouraging them from selling, while a chronic housing shortage continues to prop up prices. The result is a “frozen market,” where affordability, uncertainty, and economic anxiety keep both buyers and sellers on the sidelines.

A recent New York Times article on this topic featured a study that Gies Associate Professor of Finance Julia Fonseca co-authored with Lu Liu (Wharton). In their study, Mortgage Lock-In, Mobility, and Labor Reallocation, they show that today's housing market is uniquely constrained by historically low mortgage rates, with nearly 60% of homeowners locked into sub-4% loans — making them reluctant to sell and trade up to higher-rate mortgages.

Fonseca was also quoted in NYT's DealBook newsletter on the effects of tariffs on building materials. “Whether that’s enough to offset this mismatch between sellers and buyers we’re seeing now, I’m not sure," Fonseca told NYT.