3 reasons the US housing market might not be headed for a revival anytime soon

Pantheon Macroeconomics, via Senior US economist Oliver Allen, forecasts that a significant and sustained recovery in the U.S. housing market is improbable in the near term, despite recent improvements like new home sales reaching a three-year high and mortgage rates easing to 6.30%. Allen attributes this outlook to persistent challenges including stretched housing affordability, still-elevated mortgage rates, and a struggling labor market, emphasizing that overall market activity remains depressed with pending sales approximately 30% below pre-pandemic levels.

Analysis

Pantheon Macroeconomics, through Senior US economist Oliver Allen, projects that a significant and sustained recovery in the U.S. housing market is unlikely in the near term. This outlook persists despite recent positive indicators, such as new home sales reaching a three-year high in August and the average 30-year mortgage rate easing to 6.30% from nearly 7% in late May. These improvements, while notable, are not seen as sufficient to overcome underlying structural issues.

Allen identifies three primary headwinds impeding a robust recovery: persistently stretched housing affordability, still-elevated mortgage rates, and a struggling labor market. He emphasizes that despite the Federal Reserve's recent interest rate cut and expectations of further reductions, overall housing market activity remains "very depressed."

Specifically, pending home sales are approximately 30% below their average pre-pandemic levels, underscoring the market's continued weakness. The market spent much of 2025 in a "gridlock," characterized by buyers' inability to afford homes and sellers' reluctance to lower prices, often opting to withdraw listings instead. This suggests that the recent uptick in new home sales may be an anomaly rather than a trend reversal.

Key Decisions for Investors

• Investors should maintain a cautious stance on the U.S. housing market, recognizing that recent positive data points may not signal a sustained recovery.
• Monitor key economic indicators such as housing affordability metrics, sustained trends in mortgage rates, and labor market health for signs of fundamental improvement.
• Consider potential impacts on housing-related equities and REITs, as the "dark ages" forecast suggests prolonged pressure on demand and pricing.