Is the economy slowing—and could it help real estate?

For several years, the real estate market has been trapped in a frustrating cycle: high mortgage rates, record-low inventory, and affordability challenges that have sidelined buyers and sellers alike. But over the past few weeks, the economic landscape has shifted in unexpected ways—ways that could, for the first time in a while, provide a glimmer of hope for the housing market.​

Recent data is beginning to expose potential signs of economic weakness. The most striking evidence came last week when the Atlanta Federal Reserve’s GDPNow tracker, which was projecting 2.9 percent growth for the first quarter as of Jan. 31, reversed course and now forecasts a 2.4 percent contraction. In just nine days, expectations of solid growth have been replaced by concerns about an economic slowdown. This abrupt shift has left many analysts reassessing their projections for the coming months.​

Several factors are contributing to this unexpected economic news:

■ Consumer spending is slowing. According to the Commerce Department’s Bureau of Economic Analysis, Americans cut back on spending in January at the fastest rate in four years, raising concerns that economic uncertainty is weighing on household budgets.

■ The job market is showing cracks. Jobless claims have ticked up, particularly in government sectors where workforce reductions are underway. Additionally, according to the Labor Department, U.S. employers added only 143,000 jobs in January and 151,000 jobs in February, both figures came in below expectations.

■ Pending home sales hit a record low in January. According to the National Association of Realtors, the deep freeze that blanketed much of the country may have contributed. However, affordability seems to remain the greatest challenge.

■ Confidence is slipping. In February 2025, the Conference Board’s Consumer Confidence Index fell by seven points, marking the largest monthly decline since August 2021.

Much of this uncertainty is driven by policy decisions coming out of Washington. President Trump has moved quickly to implement federal spending cuts, reduce the government workforce, and impose new tariffs on imports from Canada, Mexico, and China. While these policies are expected to drive inflation higher, the market’s reaction suggests that growth concerns now outweigh inflation fears.​ That is, until a new economic report suddenly reminds investors that rising prices remain a concern. Days later, the merry-go-round of conflicting concerns begins anew for the broader economy, which could portend bad news. But for real estate, a softening economy can have an upside. If economic growth continues to slow, it could put downward pressure on interest rates—offering much-needed relief to homebuyers who have been priced out of the market. Lower interest rates can enhance affordability, potentially revitalizing buyer interest.

We’re already seeing early signs of a market shift. As investors react to weaker-than-expected economic data, they’re moving their money into safer assets like U.S. Treasury bonds, pushing yields lower. The 10-year Treasury yield has fallen half a percentage point since Jan. 13 and, because mortgage rates tend to follow Treasury yields, the 30-year fixed mortgage rate has also dropped. Mortgage News Daily shows that a 30-year fixed rate loan for a single-family home can be secured at 6.79 percent—a half-percentage point decrease in the past six weeks. If the economy continues to demonstrate signs of softening, mortgage rates could benefit from further money flowing into Treasuries. Moreover, the Federal Reserve may be compelled to cut rates sooner than expected. But, then again, given the whipsaw pace of policy changes and mutable pronouncements emanating from Washington, recent economic data could be ephemeral. Monitoring these developments will be imperative to understanding emerging trends and their impact on the housing industry.

Of course, lower rates won’t fix everything. Buyers eager to take advantage of better financing still need homes to purchase and, here in Rochester, there aren’t many. This scarcity continues to frustrate eager buyers ready to enter the market. According to the Greater Rochester Association of Realtors’ Multiple Listing Service there are currently 112 existing, single-family homes available for sale in Monroe County (priced above $200,000). This represents .73 months of supply. In other words, it would take three weeks to sell all current listings at the current sales pace. Four to six months of supply is considered a balanced market. Meanwhile, Redfin recently reported that homes in Rochester are selling after only 16 days on the market. This rapid turnover underscores the high demand and competitiveness within our local market. Redfin also reports that:

■ Homes for sale in Rochester receive an average of five offers.

■ Approximately 63 percent of local homes sold above their list price in January 2025.

■ On average, local residential real estate sells about 8 percent above list price.

The “lock-in effect,” which has kept many homeowners from listing their properties, remains a key factor in Rochester’s housing shortage. However, early signs suggest its grip may be loosening. The Federal Reserve Bank of St. Louis has reported that, nationally, the number of active listings increased 27 percent over the past year. While Rochester has yet to see a comparable surge, broader trends tend to manifest themselves locally with time. The real question is: when? Predicting these shifts remains difficult, but Rochester’s market will eventually follow national movements— just on its own timeline.

If mortgage rates continue downward and more homeowners decide to list, Rochester’s market could finally see some long-awaited relief. But for now, the imbalance persists—demand remains strong, supply remains tight, and buyers continue to face fierce competition. March traditionally marks the start of the spring selling season, a time when new listings typically begin to hit the market.

The question is whether this year will follow that pattern, remain constrained by low inventory and economic uncertainty, or signal the beginning of a shift back toward the more balanced conditions we saw before COVID. Either way, staying informed will be key for those looking to navigate what’s next in real estate.

Mark Siwiec is CEO/broker with Elysian Homes.

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