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

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By Sarupya Ganguly

BENGALURU (Reuters) -The United States’ sluggish housing market will remain weak through next year as high mortgage rates stifle demand with only a modest rebound expected in 2027, a Reuters survey of property experts showed.

Persistent supply shortages and stretched affordability have kept most first-time buyers on the sidelines with existing homeowners reluctant to sell properties financed at mortgage rates below 4%, further choking activity.

Although that inventory crunch has eased, with active listings climbing to their highest this decade, mortgage rates hovering around 6.5% continue to sap demand.

That has pushed home prices, measured by the S&P CoreLogic Case-Shiller composite index of 20 metropolitan areas, into four straight months of decline – the first such streak since February 2023.

Expectations the U.S. Federal Reserve will cut rates, beginning with a 25-basis-point move on Wednesday, followed by at least another one this year and several more in 2026, have had little impact on mortgage rates.

U.S. home prices are expected to rise just 2.1% this year and 1.3% in 2026, according to median estimates from 27 housing analysts in a September 2-16 Reuters poll, well below the 3.5% rises predicted for both years in a June survey.

Home prices would then recover slightly to rise 3.0% in 2027, survey medians showed.

“With the labor market looking more strained, housing demand will remain soft, though we could start to see some forced sellers, who can no longer keep up payments, if unemployment rises,” said James Knightley, chief international economist at ING.

“It may be that we get a bit of a house price correction over the next six to 12 months or so. Even so, buying a home is going to be out of most young Americans’ reach for quite some time.”

In late 2024, the median age of a first-time buyer was 38 – a record high well above the late-20s typical in the 1980s – the National Association of Realtors has said. And average home prices are currently almost 60% above pre-pandemic levels.  

Still, lower interest rates would improve purchasing affordability for first-time buyers over the coming year, said all 25 housing analysts responding to an additional question, though most cautioned the relief would be marginal.

Rate cuts are unlikely to translate into a sharp drop in mortgage costs, since they mainly pull down the short end of the Treasury curve. Longer-dated yields which drive mortgage rates are expected to remain elevated, a separate Reuters survey showed.

The 30-year mortgage rate was forecast to average 6.37% next year and 6.20% in 2027, still higher than the roughly 4% typical of the previous decade.

Existing home sales, accounting for over 90% of total transactions, would hover at an annualized 4.0 million units through this quarter and next, inching up to around 4.1 million by early 2026 and well below the pandemic-era peak of 6.6 million at the start of 2021.

(Reporting by Sarupya Ganguly; Analysis by Anant Chandak; Polling by Renusri K; Editing by Joe Bavier)