Why Buying a Home Could Stay Tough Until 2026

Housing Market Outlook: Why Buying a Home May Not Get Easier Until 2026

The ongoing housing affordability crisis continues to be a significant challenge for potential homebuyers, and experts predict that relief may not come anytime soon. According to Capital Economics’ economist Thomas Ryan, high home prices and elevated mortgage rates are likely to persist through 2026, making it increasingly difficult for many Americans to purchase a home.

What’s Driving the Crisis?

Two major factors contribute to the affordability challenges:

1. High Mortgage Rates:
   • Ryan forecasts that the average 30-year fixed mortgage rate will hover around 7% for much of 2025, with only a modest decline to 6% expected by late 2026.
   • This projection is tied to President-elect Donald Trump’s “inflationary policy agenda,” which has reduced expectations for significant interest rate cuts from the Federal Reserve.
2. Rising Home Prices:
   • Home prices are expected to continue climbing, with Capital Economics forecasting a 4% increase in both 2025 and 2026.
   • If these trends hold, the median-priced home in the U.S. could reach $455,000 by 2026, the highest level on record.

The Current State of the Market

The recent rebound in mortgage rates has already had a noticeable impact. According to Freddie Mac, the average 30-year fixed mortgage rate climbed to 6.81% last week, up from 6.08% a month prior. This increase has:

• Reduced refinancing activity to a standstill.
• Reversed the growth in home-purchase applications seen earlier this fall.

These conditions create a challenging environment for both buyers and sellers, with fewer transactions occurring due to strained affordability.

Consumer Sentiment Reflects the Struggle

Recent data highlights how Americans feel about the housing market:

• According to the University of Michigan’s consumer sentiment survey, fewer than 20% of respondents believe it’s a good time to buy a home. This marks a steep decline from the roughly 70% of consumers who held a positive outlook on homebuying before the COVID-19 pandemic in 2020.

“With borrowing costs elevated, house prices at all-time highs, and inventory scarce, it is no wonder that households are downbeat about home buying,” Ryan wrote.

What’s Ahead for the Market?

Looking forward, the combination of rising home prices and elevated borrowing costs is expected to maintain pressure on affordability. Ryan’s forecast paints a challenging picture:

• Affordability will remain strained, particularly for first-time buyers and those looking to upgrade.
• Inventory shortages will likely continue as homeowners locked into lower mortgage rates opt to stay put.

While the road ahead may seem daunting, having a clear understanding of market dynamics and seeking expert guidance can help navigate these challenging times. As your trusted real estate professional, I’m here to provide insights and strategies to help you achieve your homeownership goals, no matter the market conditions.

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✉ miya.gonzalez@cbrealty.com

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