Your bill for waiting just came in.
I had a client tell me last week that she was going to wait until things felt more stable.
I asked her what stable would look like. Not rhetorically, I actually wanted to know. What would have to be on the news for her to feel okay about writing an offer. She thought about it for a while and then said she wasn't actually sure…
I have had some version of that conversation probably forty times this year, and I want to talk about it today because this week we got some numbers that measure the real cost of waiting.
It doesn’t make sense.
Pending home sales for September came in down 7.3% from August, and down 11.3% from a year ago. The West was down 15%. Economists were only forecasting a decline of 0.4%. That’s a big miss. The actual number was roughly eighteen times worse than the forecast?
The forecast wasn’t wrong because the economists missed the rate move. Everyone could see the rate move. September had six consecutive weekly increases and ended with the 30-year fixed at 7.40%. The payment math, the qualification math, the shrinking buyer pool…all of that was in the model.
Lawrence Yun at NAR attributed the drop to fast-rising mortgage rates, and he’s right about the mechanism in September. But rates rising explains a 0.4% forecast. Does it fully explain a 7.3% collapse?! I think something else took the other seven points.
That something else is what I have been calling the Confidence Tax.
Confidence Tax Official Definition
The Confidence Tax is the gap between what the math says a market should do and what people actually do. It is very important to understand: this tax is paid entirely by the person who stays on the sidelines.
It is a different thing than affordability. Affordability is a real constraint with a real number attached to it. If the payment does not work, the payment does not work, and I will say that as plainly as I always do. That’s arithmetic, and arithmetic gets the final say. The Confidence Tax lives somewhere else.
The Confidence Tax is what happens to the people for whom the payment does work, and who do not move anyway, because the environment feels unsafe in a way they cannot fully articulate. My client who would “just know” when things felt right to buy.
Here is why I call it a tax instead of a mistake. A mistake is a one time event. A tax is something you pay continuously, in the background, usually without an itemized receipt. The person who sat out the beginning of this year did not just miss February. They are still paying, because the financing they would have had in February is the thing they gave up, and the missed appreciation, amortization gains and peace of mind are the things they will not get back.
And the brutal irony of this particular market is that the Confidence Tax is highest exactly when the terms are best. September was the single best negotiating environment I have worked in. Sellers outnumbered buyers by the widest margin in over a decade. Roughly one in five listings had a price cut. Nearly half of buyers were getting concessions.
That is also the month the fewest people in the history of the modern housing market went under contract. The leverage was available. It was their nervous systems that said no.
Let Me Itemize It
So what does the tax actually cost? Let me put a number on it, because a tax nobody can see the amount of is a tax everybody keeps paying ignorantly.
A year ago this week the 30-year fixed was 6.19%. This morning it came in at 7.32%. Same Freddie Mac survey, twelve months apart.
On a $450,000 house with 10% down, that is a payment of $2,478 then and $2,782 now. Three hundred and four dollars a month. Thirty six hundred and fifty dollars a year. And $109,511 over the life of the loan.
You also paid $933 less principal in your first year, which is the part nobody counts. That is forced savings you simply did not do. But here is another interesting number…
Hold the payment steady at $2,782, the number you can afford today. A year ago that same payment financed a $505,000 house.
Fifty five thousand dollars of house, evaporated. No seller captured it. No competing buyer took it from you. It just stopped existing while you waited for a feeling.
And look at what you were waiting for. You were waiting for prices to come down. Prices came in roughly flat. Sure you won the argument. It only cost you fifty five thousand dollars to prove your point.
Why Your Brain Does This
I spent five years in a marriage and family therapy program learning how people make decisions under stress, and the single most useful thing I took from it is this: your nervous system is trying to keep you from getting hurt. Making you money has never been its job. Those two can be conflicting assignments.
When the environment is loud and uncertain, your brain does not run a cost benefit analysis. It runs a threat assessment. And a threat assessment has a strong bias toward inaction, because historically, in the environment humans actually evolved in, doing nothing was usually the safest option.
The problem is that in a financial market, doing nothing is actually a position. It is a leveraged bet that conditions will be better later, and it is a bet almost nobody would make on purpose if you described it to them that way. Hear me out…
Ask someone if they want to bet that houses will be cheaper and rates will be lower in eighteen months, with the penalty for being wrong being that they buy the same house with more competition at a higher price. Most people say no thank you. But that is the bet being placed by default, in mass right now.
Waiting feels like neutral. If you learn nothing else from me, let this be your one take-away. Waiting is a trade.
Builders Are Doing the Exact Same Thing
Here is the part that convinced me confidence is what’s driving this.
Builder confidence came in at 29 in October, down three points, the lowest reading in over fourteen years. For context, anything under 50 means more builders see conditions as poor than good. Twenty nine is pretty pessimistic.
Single-family completions were down 11% year over year. Total housing starts fell 5.2% for the month.
Now, builders are sophisticated operators with capital, analysts, and pro formas. They are not a nervous first-time buyer. And they are doing the same thing: pulling back hard because of what they believe demand will feel like a year from now.
Both sides of this market have stopped pricing the numbers and started pricing a mood. Buyers are waiting for a feeling. Builders are waiting for buyers. Each one is the other one’s excuse.
That is how you get a market with historic leverage people aren’t properly recognizing.
And Now the Honest Correction
Two weeks ago I wrote about a loop where high rates stop construction, missing construction tightens rental supply, rising rents push inflation, and inflation keeps rates high. I still think that loop is real and I stand behind the mechanism.
But last week’s inflation report tells me I need to be more precise about the timing, so let me do that rather than let you believe something I no longer believe in the same way.
September CPI came in at 3.7% annually, hotter than the 3.6% expected, and up 0.6% for the month. Core came in at 2.6%.
Here is the composition.
Energy: up 20.4% year over year
Gasoline: up 34.2% year over year
Shelter: up 3.2% year over year
Rent of primary residence: up 2.8% year over year
Owners equivalent rent: up 3.3% year over year
Gasoline wrote the report. Again. Thirty four percent on gasoline against 2.8% on rent.
So the thing I want to be straight with you about: the inflation you are angry about right now is an energy problem. Shelter is currently the calmest major line in that report. The construction shortfall I wrote about is going to be a 2028 problem.
Which actually makes the current situation stranger, not better. Rates are at 7.40% because of gasoline. Your mortgage is expensive because of a war. And the single biggest input into the inflation number driving your rate has a political calendar attached to it rather than an economic one.
The Fed Chair Said the Quiet Part
Warsh spoke at the IMF meetings last Friday and said something I want to make sure you caught, because it got buried under the rate speculation.
On the AI buildout, he said central bankers have "got to recognize this as a shock," and that it is "obviously hitting the demand side of the economy before it's hitting the supply side." He added that while he expects AI to eventually deliver real productivity and wealth, "the path from where we are to there is likely to be a very bumpy one."
I have said that AI is something that eventually brings rates down, and I still believe the long arc of that. What Warsh just described is the near term version, and it runs the other way. All that capital spending shows up as demand now. The productivity payoff, the part that is actually disinflationary, arrives later.
Demand now, supply later. In plain English, that means AI is inflationary before it is deflationary, and the Fed Chair is now saying so from the podium. That pushes the rate relief timeline out past where a lot of forecasts are sitting. I think this is why most forecasts are holding interest rates in the mid-6’s through next year.
He also declined to say anything about the next meeting, in his words, "I don't pre-judge meetings." Markets took the whole appearance as a signal to hold. Odds of no change on October 28 jumped to roughly 86%, up from about 55% the day before.
Where Rates Actually Are
The 30-year fixed came in at 7.32% this morning, down from 7.40% last week. That is the first decline in eight weeks, after seven consecutive increases. The 15-year sits at 6.68%, and a year ago the 30-year was 6.19%.
Sam Khater at Freddie Mac called it “some relief to prospective homebuyers,” and he is right. Eight basis points is small, but it is finally pointed in the direction that matters.
Now here is what I am actually watching, and it happens to be this entire blog compressed into one question.
September fell apart while rates were climbing. That is the explanation everybody is going to reach for, and it is partly true. But rates have now turned.
So if this is purely a rate story, the November pending sales number should start to firm up. The math just got better. The payment just got cheaper. A rate-driven market responds to that.
And if it doesn’t? Then we have our answer in writing. Because the thing holding this market down is what people believe the number is going to do next, and a belief like that does not update on eight basis points.
I will be watching that number more closely than anything the Fed says next week.
If You Are Buying…
And cannot bring yourself to take advantage of the leverage available to you right now – that’s ok. This blog is just educational. Here’s what I want you to do: Write down, on paper, what stable would look like. An actual rate. An actual month. An actual data point you would need to see.
Do it now, while nothing is happening, because that is the only time you can think clearly about it. If you cannot finish the sentence, that is your answer: you’re letting your nervous system run your finances. Again, that’s ok. Most people do. I want you to be aware of it though.
And know what is on the table while everyone is in the crouch. Realtor.com's Joel Berner pointed out this week that buyers right now can negotiate builder rate buydowns worth up to a full percentage point. A full point is the difference between qualifying and not qualifying, and it exists because builder confidence is at 29 and they need transactions more than they need their margin.
If You Are Selling
Your buyer pool shrank because of a mood, and you cannot price cut your way out of a mood – in my expert opinion of never having sold a home personally or professionally.
What you can do is remove the ambiguity, because ambiguity is the thing actually stopping today’s buyers. Pre-listing inspection, so there is no surprise in week three. A concession structured as a rate buydown rather than a price cut, because the same dollars do far more for a nervous buyer's monthly payment than they do for your list price. And a specific answer to the question of what it costs per month to live in your house.
I would also suggest marketing what it’s like to live in the home. Realtors, I’m talking to you. Help buyers imagine a day in the life at that property. Waking up and going to the closest Pilates studio, which local coffee shop they could hit after school drop off on their way to work, the grocery store they’d do pick up at on their way home, the route they’d walk their dog.
You’re competing on vibes now.
If You Work in This Business
Read the pending sales number again. Down 7.3% against a 0.4% forecast.
Everything in that gap is your job.
The arithmetic part of this business is largely solved. Anybody can pull a rate, run a payment, and send a pre-approval. What almost nobody in our industry is actually doing is sitting with a client's fear long enough to find out what it is made of, and then answering the real question… instead of the one they asked.
When somebody says they are waiting for the market to settle down, that’s a nervous system telling on itself. If you respond with a rate forecast, you’re not moving the needle for them.
The Confidence Tax is the largest untapped opportunity in this industry right now, and you collect it with conversation. Connection, actually.
What To Watch
The Fed meets Wednesday, October 28, five days from now, with roughly 86% odds of no change. Six days after that, the midterms.
I do not think the October meeting changes much. The thing I am watching is whether anyone starts talking about the composition of this inflation rather than the level of it, because a 3.7% print driven by a 34% move in gasoline is a fundamentally different problem than a 3.7% print driven by shelter, and the medicine for one is doing almost nothing for the other.
But that is macro. And I’ve told you it’s just a weather report.
What is actually in your control this week is whether you can finish the sentence. What would stable look like. Write it down. Then go find out how far away it actually is, because I suspect for a lot of you the honest answer is closer than it feels, and the only thing standing between you and it is a feeling you have never once examined in daylight.
Three hundred and four dollars a month. Fifty five thousand dollars of house. Waiting is a trade.
That is the tax. But unlike death and other taxes, this is one is in fact optional.
Shivani Peterson is the Chief Performance Officer at All Western Mortgage and founder of Mind Over Markets. She holds a master's degree in Marriage and Family Therapy and writes weekly about the intersection of real estate, mortgage markets, and the psychology of financial decision-making. This is not financial advice. It is however, the most honest read on this market you will find on a Friday morning.
