"Home Prices Now Determined by Employment and Income, Not Just Interest Rates" [Weekend Money]

U.S. Housing Market Stuck in Stalemate, Anticipates Rate Cuts
Rising Anxiety Over Long-Term Loans Amid Job Insecurity
From the Age of Interest Rates to the Era of Purchasing Power

Interest rates have always been the decisive factor in the housing market. When the central bank raised rates, higher borrowing costs deterred homebuyers. When rates fell, transactions picked up and home prices rose. In effect, the temperature of the housing market has been set by interest rates. The U.S. housing market was no exception. However, forecasts are now emerging that this formula may be breaking down. Some experts predict that income and employment—essentially, purchasing power—will soon outweigh interest rates in their impact on the market.

In a report published on June 4, Youngjoo Lee, a researcher at Hana Securities, wrote, "Going forward, it may be difficult to explain the housing market through interest rates alone," adding, "Purchasing a home is not just about interest rates but depends fundamentally on income and employment; ultimately, the essence of the housing market is purchasing power."

U.S. Homeowners Trapped by Ultra-Low Rate Loans

In fact, subtle signs of change are emerging in the U.S. housing market. In the first quarter of 2026, there were approximately 119,000 home foreclosures— the highest level since the early days of the COVID-19 pandemic. The supply of homes for sale is gradually increasing, but transactions remain sluggish.

For those who bought homes during the pandemic, many still hold ultra-low interest rate mortgages of around 3%. If they sell their homes and buy a new one now, they face a new mortgage rate of 6–7%. This means their monthly payments would nearly double. In other words, even if they want to sell, they can't. This phenomenon—being locked in by low rates—is known as the "lock-in effect."

Existing homeowners are not selling, while new buyers cannot find homes to purchase, creating a persistent stalemate. As a result, the market has been waiting for the Federal Reserve (the U.S. central bank) to cut rates, hoping this would break the deadlock.

However, even this outlook is uncertain. There is a significant possibility that housing transactions may not pick up even if rates are lowered.

Buying a home is not just about borrowing costs. Prospective buyers need confidence in their future income to commit to a 30-year loan. Yet, as AI adoption accelerates, companies' hiring strategies are changing. Hiring slowdowns are appearing, particularly among office and professional positions. Even if productivity increases, there is no longer a guarantee that this will translate into job security.

Indeed, in a recent Gallup survey, only 25% of Americans said they plan to buy a home in the next five years—the lowest figure since the survey began in 2013. The high cost of homes is not the only reason. The burden of buying a home in the U.S. is currently assessed to be even higher than during the 2006–2007 real estate bubble peak. This is the result of both home prices and financial costs accumulating simultaneously.

"To Forecast the Real Estate Market, Employment and Income Structures Must Be Considered Together"

Researcher Lee stated, "Even if the productivity revolution driven by AI leads to lower interest rates, if uncertainty over employment and income grows, the recovery of housing demand may be limited. Ultimately, the decision to purchase a home is influenced more by confidence in future income than by the level of interest rates."

While rate cuts may be a necessary condition for the housing market's recovery, they are not a sufficient one. If anxiety over job security—'Will my job be safe?'—remains unresolved, committing to a 30-year mortgage contract will not be easy.

Lee concluded, "The future direction of the U.S. housing market ultimately depends less on mortgage rates themselves and more on how much household purchasing power can recover. The market must now pay closer attention to purchasing power than to interest rates, as well as to changes in employment and income structures in the AI era that will affect that purchasing power."

This content was produced with the assistance of AI translation services.