By Quentin Fottrell
Will Trump’s tariffs push the U.S. into a recession?
Dear Quentin,
I’ve bought three homes in my life: in 2001, in 2006 and in 2020. I did not fare well with any of my previous houses profitwise, although I had some good memories in all three. Now I’m looking to buy what I hope is my final home where I can spend the rest of my days.
I don’t want to move again and, given my bad timing with previous homes, I’m nervous about taking this leap again. I’m 52 and single and work remotely, so I can live pretty much wherever I like, within reason. But this is the last time I want to go through this.
Will President Donald Trump’s tariffs push the U.S. – and the rest of the world – into recession? Should I wait before buying a home?
Fourth Time Lucky
Related: ‘I cannot afford to lose more’: Will Trump’s ‘liberation day’ tariffs hurt my retirement?
Dear Lucky,
You face a triple threat: a possible recession, high house prices and elevated interest rates.
There are challenges whenever people buy homes. When you purchased your house in 2020, you were facing two of those three: a pandemic-fueled recession and high prices. You were given a high-five pass on high interest rates, if you were taking out a loan.
So here’s the short answer: If you can afford it (comfortably) and you find a home that you love in a place that you like, and you can imagine living there for the next 20-plus years, proceed apace. Trying to time the housing market is tough. Trust your own instincts on that.
In 2020, when you bought your last home – your hat trick! – you were probably paying an interest rate of close to 2.5% or 3%, versus a rate of 6.7% for a 30-year mortgage today; for comparison, the 30-year rate for mortgages in the European Union is currently 3.25%.
The Fed is in a tough spot
You will have higher monthly mortgage payments than for the home you bought in 2020, assuming you are taking out a mortgage for the same amount. The Federal Reserve will take a cautious view of the economic landscape and is unlikely to cut rates significantly.
“A pivot to rate cuts is plausible – and potentially swift – if the tariffs do more economic damage than anticipated,” says Nuwan Jayawardana, director of investment research at Acuity Knowledge Partners. “Asset managers should remain flexible and scenario-ready. ”
If a slowdown in the economy pushed the Fed towards more rate cuts, it would reduce cost of your mortgage payments. As you enter the spring homebuying season, there will hopefully be more inventory on the market. Serious sellers tend to be seasonal, while buyers are active all year around.
Your decision will also depend on where you choose to buy a home. Major metropolitan areas like New York, Chicago, Seattle, Los Angeles and San Francisco will probably continue to see prices rise over the medium- to long-term. There are pockets where prices are falling.
Related: Trump’s sweeping tariffs could have a surprising silver lining for home buyers
There’s a shortage of homes
I’ve heard stories of people putting up their houses for sale because of their perceived (or feared) impact of Trump’s trade war. They may be right, they may be wrong; but there is still a shortage of housing in the U.S. and the cost of imported raw materials will go up.
Housing demand has failed to keep up with supply and millions of homeowners who are locked in at mortgage rates below 5% are, understandably, reluctant to sell and settle for a higher mortgage. The shortage is not helped by a peak in interest from institutional investors.
The National Association of Home Builders said the housing industry continues to experience “elevated building material costs that are exacerbated by tariff issues, as well as other supply-side challenges that include labor and lot shortages.”
“At the same time, builders are starting to see relief on the regulatory front to bend the rising cost curve,” the NAHB added. It’s not an insignificant issue, given that the housing sector represents approximately 16% of gross domestic product.
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Recession predictions heat up
Economists and consumers are, naturally perhaps, upping their own predictions of whether there will be a recession on the back of Trump’s trade war. Polymarket, the U.S.-based crypto-based prediction market, sees a 46% chance, up from 30% on March 1.
There are already concerns about a global recession taking hold, although Asian countries like Vietnam, and others hardest hit, may feel the effect most severely. And yet IMF managing director Kristalina Georgieva told Reuters she did not see a global recession, at least for now.
Even if there was a recession, there’s no guarantee that it would be deep and prolonged. Aside from the Great Recession, which was fueled by subprime mortgages and excessive lending, recessions can be brief and rarely take such a severe bite out of the housing market.
The last recession (2020) lasted just two months; the Great Recession (2008) lasted 18 months, although house prices in most areas took several years to recover from their pre-recessionary heights; and the recession post dot-com bubble burst (2001) was over in just 8 months.
Trust your gut before signing
That’s the long answer. Your decision will be based on your personal finances, your gut about the global economy and, yes, whether you find a house that you fall in love with. Ask yourself why you sold up in the past, and what would be different for you this time around.
Did you move for work? Do you have commitment issues to living in one place for very long? Do you invest a piece of real estate with too many hopes and dreams, making it almost impossible for your home to live up to those expectations? Or have you had bad luck with neighbors?
You say you’ve lost money or, at least, have not made a profit on previous house purchases. There’s no harm in renting until you feel like you have a clearer path ahead. Only proceed if you can live through all possible eventualities.
You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com, and follow Quentin Fottrell on X, the platform formerly known as Twitter.
The Moneyist regrets he cannot reply to questions individually.
More columns from Quentin Fottrell:
My portfolio lost 20%. With Trump’s trade war, do I sell my stocks and buy gold?
Will Trump’s policies lead to a recession? I’m 62 and earn $50K. How should I invest $100,000?
‘I’m not being a troll’: I bought ‘DJT’ stock and I’m down 50%. I’m sweating. What now?
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-Quentin Fottrell
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04-04-25 0309ET
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