"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 a decisive factor in the housing market. When central banks raised rates, the burden of borrowing increased, reducing the number of potential homebuyers; when rates were cut, transactions picked up and home prices climbed. In effect, interest rates have determined the temperature of the housing market. The U.S. housing market was no exception. However, there are now predictions that this formula is starting to break down. Some forecasts suggest that income and employment—purchasing power—are becoming more influential than interest rates.

Lee Youngju, a researcher at Hana Securities, stated in a report published on June 4, "Going forward, it may be difficult to explain the housing market solely by looking at interest rates," adding, "Buying a house is about income and employment, not just rates, and the essence of the housing market ultimately comes down to purchasing power."

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

Indeed, subtle signs of change are emerging in the U.S. housing market. In the first quarter of 2026, the number of home foreclosures reached approximately 119,000—the highest level since the early days of the COVID-19 pandemic. While listings are slowly increasing, transactions remain sluggish.

For those who bought homes during the pandemic, most still hold mortgages with ultra-low interest rates of around 3%. If they sell now and purchase a new home, they must prepare for new loan rates of 6–7%. This means monthly payments could nearly double. In other words, even if they want to sell, they can't. This phenomenon, where homeowners are locked in by cheap loans, is known as the "lock-in effect."

Existing homeowners are not putting their homes on the market, while new buyers cannot find properties to purchase, resulting in a persistent deadlock. This is why the market has been waiting for the Federal Reserve to lower rates, hoping such a move would break the stalemate.

However, even this outlook is now uncertain. There is a significant possibility that home sales might not pick up even if rates are cut.

Buying a house is not just about the cost of borrowing. One needs the confidence that "my income will be stable in the future" before signing up for a 30-year loan. However, as AI spreads rapidly, companies are changing their hiring strategies. Hiring is slowing, especially in office and professional roles. Even as productivity rises, it no longer guarantees job security.

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. High home prices are not the only reason. The current burden of purchasing a home in the U.S. is considered high, even compared to the peak of the 2006–2007 real estate bubble. This is the result of rising home prices and financing costs accumulating at the same time.

"To Forecast Real Estate, Employment and Income Structure Must Be Considered Together"

Researcher Lee analyzed, "Even if the productivity revolution driven by AI leads to lower interest rates, if uncertainty around employment and income increases, the recovery in housing demand could be limited," adding, "Ultimately, decisions to buy a home are more influenced by confidence in future income than by current interest rate levels."

In other words, rate cuts may be a necessary condition for a housing market recovery, but not a sufficient one. If anxieties about job security are not resolved, it is not easy for buyers to commit to a 30-year mortgage, even if rates fall.

Lee concluded, "The direction of the U.S. housing market will ultimately depend less on mortgage rates themselves and more on how much household purchasing power can recover," adding, "Now, the market needs to pay closer attention to purchasing power than to rates, and to the changes in employment and income structures in the age of AI that will affect that purchasing power."

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