Top Housing Economist Issues Grim Forecast Revision as Higher Rates Slam the Market

National Association of Realtors® Chief Economist Lawrence Yun has issued a grim revision to his 2026 housing market forecast, reflecting the unexpected surge in mortgage rates this year.

"Markets are constantly changing—some have a positive impact on the housing market, and others, negative. The big unpleasant event over recent months is the fast-rising mortgage rates, therefore further denting the market outlook," he tells Realtor.com® of his latest forecast update.

Last November, Yun projected existing-home sales would rise 14% in 2026 from the three-decade low reached last year, while forecasting that median prices would grow by 4%. 

But by April, Yun had already started tempering expectations, projecting that the existing-home sales volume would rise just 4% from last year. 

Yun cited high interest rates, inflation, and growing economic instability from the Iran war as factors shaping his outlook. 

Now, Yun says he expects existing-home sales volume and prices to grow around 2% or less this year compared to 2025. Regarding newly built homes, he projects new-home sales will decrease by 5% year over year.

Yun says mortgage rates are the culprit for the grim revisions. Initially, he had predicted that mortgage rates would average around 6.5% for the year. Since then, rates have steadily climbed and have remained above 7% since the last week of September. 

At the Mortgage Bankers Association's annual conference earlier this month, MBA Chief Economist Mike Fratantoni predicted mortgage rates would remain around 7.3% for the rest of the year and hover above 7% through 2027.

"Inflation is too high, leading central banks to raise short-term rates, while budget deficits and debt are unsustainably high, leading bond investors to push up longer-term rates," he said.

Looking ahead to future recovery

Yun's latest predictions are roughly in line with the Realtor.com economic research team's 2026 housing forecast midyear update, which was released in July. That forecast predicted that, due to inflation, rising oil prices due to the war in Iran, and rising interest rates, existing-home sales prices would rise just 1.2% through the end of the year.

At the recent Las Vegas gathering, Yun suggested that if mortgage rates trend downward in 2027, sidelined buyers would reenter the market.   

Yun told the crowd of Las Vegas Realtors® that he believed that interest rates were “the magic that drives the market,” according to the Review-Journal.

“If somehow at the beginning of 2027 we see mortgage rates closer to 6%, we will see good buying activity at that time,” Yun said.

He also suggested that an economic recession could actually be good news for the real estate market. 

“There’s so much uncertainty on geopolitics and, of course, the artificial intelligence and data center boom that is currently occurring,” Yun said. “What if it turns into a bust? It’s going to create a different dynamic.

“In all past economic recessions—other than the subprime blowout—the interest rates moved down and home sales increased more in a recession than a nonrecession,” he continued.