Market Outlook for Housing
Jason Katz, who serves as Managing Director and Senior Portfolio Manager at UBS, is set to make an appearance on Varney & Company. He recently discussed his projections for the housing market for the latter half of this year.
According to a new report, there’s optimism regarding housing affordability as the growth in house prices is anticipated to slow to below inflation rates.
A mid-year update from realtor.com forecasts that house prices will rise by only 1.2% this year, a decrease from earlier expectations and notably slower than inflation. This could suggest that, in real terms adjusted for inflation, home prices are effectively declining.
“Despite facing both ongoing and new challenges, the economy has shown resilience. Thus, the first half of 2026 has been more about stability rather than strong momentum in the housing market,” noted Daniel Hale, a Senior Economist at realtor.com.
“The housing sector is gradually progressing as sellers adjust their expectations, price increases stabilize, and buyers find themselves with a bit more leverage,” Hale added. “Looking forward, we expect to see an increase in activity as more buyers and sellers come together to reach agreeable terms.”
Mortgage Rates and Payment Trends
Mortgage rates are projected to remain steady at 6.3%, a level consistent with the end of 2025. A recent surge in inflation, influenced by the Iran war, has diminished hopes for early-year rate cuts that might have alleviated mortgage costs.
On a positive note, monthly mortgage payments are expected to decrease year over year, with new forecasts indicating a decline of 1.9%, which is more optimistic than the earlier predicted drop of 1.3%.
Existing home sales are also set to rise modestly from last year’s figures, increasing from 4.06 million units in 2025 to an estimated 4.1 million this year. However, this growth rate won’t meet the earlier forecast of 4.13 million units for 2026.
“This year, buyers and sellers seem to be showing significant resilience,” Hale remarked. “Rather than pulling out, participants are adapting to market conditions. Sellers are becoming more realistic with their asking prices, facilitating more deals.”
Current Challenges in New Home Construction
Even so, monthly mortgage payments jumped 1.9% in 2025 and surged by 7% from 2013 to 2019.
Builders are facing challenges too, as new home sales have remained sluggish while prices have leveled off. This has diminished the impact of lower mortgage rates and discounts meant to entice buyers.
In some areas, the pace of new home construction has slowed. However, the South and West are witnessing the fastest recovery from supply shortages, propelling much of the nation’s construction activity.
In contrast, existing home inventory growth is projected to be slower than anticipated, with a year-over-year increase of just 3.6% rather than the previously predicted 8.9%.
“The national housing shortage is around 4 million units,” and the Northeast and Midwest are particularly affected, presenting potential opportunities for builders.
