The struggling housing market is unlikely to benefit from the Fed rate cuts we have built into our outlook (four 25bp cuts through mid-2026). These cuts are already been priced in by markets, while mortgage rates – anchored to longer-term yields – may also carry extra risk premia amid fears of a politicised Fed. As a result, we expect the 30-year benchmark to stay above 6.5% over the next few years, keeping existing home sales weak, peaking at just 4.3m annualised. Weak demand allied with rising supply – as more people list their home for sale – creates a tough backdrop for house prices. However, we believe the market’s solid underlying fundamentals will prevent a slump. We expect prices to edge up by 1% this year, and by 2% in both 2026 and 2027.
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