From tariffs to tightness: What’s happening in the US housing market?

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Apr 15, 2025

John Sim, head of Securitized Products Research at J.P. Morgan, untangles the intricate web of the U.S. housing market. The conversation dives into how tariffs impact construction costs and affect home prices. Sim discusses the locked-in mortgage rates benefiting current homeowners, while renters face growing affordability challenges. They also predict mortgage rates could drop to 5.75% by the end of 2025, amidst changing economic conditions. Finally, rising insurance costs and consistent tenant retention rates shape rental market dynamics.

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INSIGHT

US Housing Market Overview

The US housing market has about 132 million households living in 147 million units, a 90% utilization rate.
This is up from 87% 10-15 years ago, meaning demand outpaced supply by about 4 million units.

INSIGHT

Affordability Disparities

While overall cost-to-income is 35%, this masks differences between homeowners and renters.
Homeowners' cost-to-income is 20%, while renters' would be 55% if they bought.

INSIGHT

Locked-In Homeowners

62% of homeowners have mortgage rates of 4% or lower, creating a "locked" market.
This limits supply as homeowners are reluctant to move to higher rates, and renters cannot afford current levels.

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Take a deep dive into the complexities of the U.S. housing market with Anthony Paolone, co-head of U.S. Real Estate Stock Research and John Sim, head of Securitized Products Research. They examine supply-demand dynamics, President Trump’s tariffs, interest rates and other key factors affecting home prices and affordability. Taking stock of the macroeconomic environment, where could rates go next and how would this impact home prices?

This episode was recorded on April 8, 2025.

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