US housing market to remain stuck in a rut as high rates choke demand: Reuters poll

The U.S. housing market is projected to remain weak through 2026, with a modest rebound expected only in 2027, according to a Reuters survey of property experts. High mortgage rates, persistent supply shortages, and affordability challenges are stifling demand, leading to significantly lower home price growth forecasts of 2.1% this year and 1.3% in 2026, alongside subdued existing home sales volumes. Despite anticipated Fed rate cuts, mortgage rates are expected to stay elevated, offering limited relief for buyers and keeping market activity soft.

Analysis

The U.S. housing market is projected to face a prolonged period of weakness through 2026, with only a modest recovery expected in 2027, according to a Reuters survey of property experts. High mortgage rates, hovering around 6.5%, are significantly stifling demand, while an inventory crunch persists as homeowners with sub-4% mortgages are reluctant to sell. This dynamic has pushed the S&P CoreLogic Case-Shiller index into four consecutive months of decline. Reflecting this pessimism, analysts have substantially lowered home price growth forecasts to just 2.1% for this year and 1.3% for 2026, a sharp decrease from the 3.5% previously estimated for both years. Transaction volumes are also expected to remain depressed, with existing home sales forecast to hover at an annualized 4.0 million units, well below the pandemic-era peak of 6.6 million. Despite expectations for Federal Reserve rate cuts, the impact on housing affordability is anticipated to be marginal, as 30-year mortgage rates are forecast to remain elevated, averaging 6.37% next year. A key downside risk highlighted is the potential for rising unemployment to create "forced sellers," which could trigger a more significant price correction in the next 6 to 12 months.

Key Decisions for Investors

• Investors should exercise caution with direct exposure to residential real estate assets, including homebuilders and mortgage lenders, given the forecast for weak transaction volumes and anemic price growth through 2026.
• Monitor labor market indicators closely, as a rise in unemployment could act as a catalyst for a more pronounced housing price correction than currently forecasted by creating forced sellers.
• Do not position for a sharp housing rebound based on anticipated Federal Reserve rate cuts, as the analysis indicates that long-term mortgage rates are expected to remain elevated, limiting any substantial improvement in affordability or market activity.