The U.S. housing market is under mounting pressure in April 2025, as recession fears grow and China signals it may escalate financial retaliation by selling off U.S. mortgage-backed securities. Together, these factors could drive up mortgage rates and shake spring buying season confidence.
Trump’s Tariffs Spark Stock Rout and Recession Warnings
Since President Trump’s announcement of sweeping “Liberation Day” tariffs on April 2, the S&P 500 has dropped over 12%, wiping out more than $10 trillion in market value. The economic aftershocks have raised the probability of a global recession to 60%, according to JPMorgan and Moody’s Analytics. Despite a rally on Wednesday after Trump announced those tariffs would be paused for 90 days, concerns have remained high.
Top financial voices including Jamie Dimon and Bill Ackman are warning of a “likely” recession or worse. The economic uncertainty is already making homebuyers nervous, and rising mortgage rates are adding to the anxiety.
China’s Mortgage-Backed Securities (MBS) Holdings: A Hidden Housing Market Risk?
Amid geopolitical tensions, China is reportedly considering selling off U.S. mortgage-backed securities (MBS)—a market where foreign investors, including Japan and Taiwan, collectively hold $1.32 trillion in assets, or about 15% of the market, per Ginnie Mae.
China’s holdings were already down 20% year-over-year as of December 2024. If a large-scale selloff occurs:
- Mortgage rates could spike
- Investor confidence in MBS could fall
- Spring home sales may further decline
As Guy Cecala of Inside Mortgage Finance warned, “Targeting housing and mortgage rates is a powerful driver of economic pressure.”
Mortgage Rates Jump as Treasury Yields Surge
With investors selling off U.S. Treasury bonds in anticipation of inflation and foreign retaliation, 10-year Treasury yields are climbing, pushing mortgage rates higher.
This surge is especially painful for homebuyers right now:
- Redfin reports 1 in 5 buyers rely on stock sales for down payments
- Recent stock market losses have eroded buyer liquidity and confidence
- Rate increases are expected to continue if foreign MBS sales intensify
Eric Hagen, an analyst at BTIG, notes that any ambiguity about the extent of foreign selloffs could “spook the mortgage market,” further increasing rate volatility.
The Fed Is No Help This Time
Unlike previous downturns where the Federal Reserve actively purchased MBS to keep mortgage rates low, the Fed is now reducing its balance sheet and letting MBS “roll off.” This tightening policy removes a key stabilizing force from the housing market just as external threats emerge.
What a Recession Could Do to Home Prices and Sales
Even without China’s financial retaliation, a recession could deepen existing market weakness:
- Home sales in 2024 were the lowest since 1995
- 2025 has shown little rebound, and buyer demand is already soft
Realtor.com data shows housing inventory is rebounding in the South and West but remains tight in the Northeast and Midwest:
- Inventory near normal in the West (-2.1%) and South (-3.2%)
- Still down 45.2% in the Midwest and 57.5% in the Northeast
What This Means:
- Prices may drop faster in overbuilt regions like the South
- Under-supplied markets may see prices hold longer before falling
- Homeowners with low fixed-rate mortgages (54% under 4%) are unlikely to default, limiting risk of a foreclosure wave
What Homebuyers Should Know in April 2025
With rate and price volatility rising, experts urge caution:
- Avoid stretching your budget—even in low-rate windows
- Maintain a liquid emergency fund in case of job loss
- Consider renting if buying feels financially tight
- Keep an eye on rate movement tied to global bond markets and Fed policy
“Don’t take on a housing payment that’s only marginally affordable,” says Realtor.com’s Hannah Jones. “And if you’re nervous, renting can give you time to wait out the storm.”
Bottom Line: The U.S. housing market in April 2025 faces a double threat: an impending recession and the potential for a foreign selloff of mortgage-backed securities. These forces could drive mortgage rates higher, unsettle spring homebuyers, and stall recovery momentum. Regional imbalances and investor uncertainty only add to the challenge.
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