Mid-Year Housing Update

If the housing market feels confusing right now, you’re not the only one.

Mortgage rates have risen. Home sales haven’t picked up as much as expected. And many buyers and sellers are wondering when things are going to feel easier or be more affordable.

The truth is: a lot changed over the first half of this year.

Back at the end of 2025, economists were forecasting a much stronger housing market for 2026. They expected mortgage rates to come down, affordability to improve more dramatically, and home sales to rebound.

But inflation, economic uncertainty as evidenced by increased gas and grocery prices, and continuing conflict in the Middle East have combined to push mortgage rates higher than expected. And because rates are staying elevated for longer, some buyers are continuing to hold off.

That’s why the real experts have recently revised their forecasts for the rest of the year (see graph below):

So, what does this actually mean for you? Let’s break it down.

Mortgage Rates May Remain Elevated

While just about everyone wants mortgage rates to go back to the uppers 5s or low 6s we saw at the start of the year, as of right now, the experts don’t think that’s likely to happen this year.

Instead, forecasts have been updated from the low 6s as originally projected. Many industry organizations are saying rates will stay in roughly the mid 6s this year. The good news is, that’s still lower than rates were a year ago.

Of course, this is based on what we know today. If the conflict overseas comes to an end or inflation drops, this could change. But if you’re waiting for lower rates, it may not pay off in the way you expect.

Existing Home Sales Revised Lower

Back in late 2025, experts expected we’d sell an average of 4.5 million homes this year. Now? That’s dropped down a bit to 4.2 million.

That tells us something important: buyers are still hesitant because affordability remains challenging.

Higher mortgage rates have made monthly payments harder to manage, especially for first-time buyers. And that’s slowed the pace of the market compared to what was originally expected. But even though the forecast was revised down, we’re still expected to sell more homes than last year. 

Once geopolitical tensions resolve and rates begin to settle down, many experts believe that group of buyers will be ready to jump back in. As Lawrence Yun, Chief Economist at NAR, explains:

“There is sizable pent-up demand that could be released into the market.”

There already have been a few glimmers of renewed hope. In recent months, pending homes sale have been improving month over month despite higher rates.

So, if you’re able to afford a home at today’s rates, it could still make sense to buy now. Otherwise, if you wait, you’ll have more competition (and potentially fewer homes to choose from) when those other buyers jump back in.

New Home Sales Also Slowed

Builders also expected to have a stronger year. Earlier forecasts projected new home sales would top 700k in 2026. Now, economists expect we’ll be just shy of that.

Again, mortgage rates are a major reason why.

But the upside for buyers is that builders may be even more motivated to sell. That means builder incentives, negotiation opportunities, and pricing flexibility may continue.

Builders could be more ready to negotiate, and that gives you more leverage to get a better deal.

Home Prices Are Still Expected To Rise

This is one of the most important takeaways from the entire forecast. Even though sales activity is slower, on average, experts did not revise their home price forecast downward.

They still expect prices to rise nationally this year.

Why? Because while buyer demand has softened, the number of homes for sale is still relatively limited overall. That imbalance is helping support prices, even in a slower market.

On Cape Cod, prices remain steady. In many cases, what’s being interpreted as a “drop in prices,” is actually sellers accepting the fact that this is not just a few years ago when it seemed one could list their house at just about any price and find a ready buyer.

And while buyers may think they want to see a drop in prices, generally you feel better about a big purchase when it doesn’t depreciate right away.

Bottom Line

The housing market hasn’t rebounded as quickly as experts originally hoped. But that doesn’t mean it’s stalled.

So don’t see this revision in forecasts as a sign of trouble. See it as a temporary reaction to overall conditions and uncertainty.

If you have selling — or buying — on your mind, we’re happy to walk you through your options. You can always find us at 508-388-1994 (Mari and Hank) or Colleen (781-264-5517.)

Let’s talk soon…

Mari, Hank, and Colleen

Nothing herein should be construed as investment advice. You should always conduct your own research and due diligence and obtain professional advice before making any investment decision.