The outlook for the US housing market in 2026

J.P. Morgan Global Research projects that U.S. house prices will stall at 0% growth in 2026 as a slight improvement in demand offsets increasing supply. While fixed-rate mortgages are expected to remain above 6%, potential easing by the Federal Reserve could lower adjustable-rate mortgage (ARM) rates and improve affordability. This shift is critical for the residential mortgage sector as it signals a transition from the persistent price inflation and supply imbalances that have defined the market in recent years.

J.P. Morgan analysts, including John Sim, head of Securitized Products Research, anticipate a national price plateau in 2026 following a decade where home values nearly doubled. Despite elevated fixed-rate mortgages, the market may find support through builder-funded rate buydowns and a potential decline in ARM rates if the Federal Reserve shifts toward easing. Regional disparities remain prominent, with price declines most evident along the West Coast and Sun Belt due to a surplus of new construction following the pandemic-era building boom. Sim notes that overbuilding in these specific areas is a primary driver of falling prices, contrasting with the national trend of stagnation.

The research challenges the prevailing narrative of a massive housing shortage, estimating the actual deficit at approximately 1.2 million homes, which is significantly lower than many industry estimates. Joseph Lupton, a global economist at J.P. Morgan, notes that the prevalence of 30-year fixed-rate mortgages created a lock-in effect that restricted supply during recent tightening cycles as homeowners were reluctant to sacrifice low rates. However, recent data shows a climb in the supply of both new and existing single-family homes, while a slowing labor market hiring rate has further restricted the traditional movement of buyers and sellers.

On the policy front, the Trump administration's proposed ban on institutional investors purchasing single-family homes is viewed by analysts as having a limited impact, given that these entities represent only 1% to 3% of the market. Michael Rehaut, head of U.S. Homebuilding and Building Products Research, warns that if the ban extends to build-to-rent projects, it could inadvertently tighten rental supply rather than aiding first-time buyers. Meanwhile, Michael Feroli, chief U.S. economist, points to a gradual improvement in sales momentum, noting that mortgage purchase applications ticked up in early 2026 despite the National Association of Realtors’ affordability index remaining 35% below pre-COVID levels.