A tariff-driven resurgence in inflation will likely keep the Fed from cutting this year, keeping mortgage rates near 7.0%. Some relief may come in 2026 and 2027 as rates drop back to 6.5%. Nonetheless, with affordability still stretched, we expect existing home sales to remain weak at less than 4.6m annualised. Homeowners are slowly adjusting to the higher-rate environment, prompting more to list their homes. We expect this slow recovery in supply to continue to keep a lid on house price inflation. We are forecasting a soft 3.5% house price gain in 2025 ahead of a slight acceleration in 2026 as demand recovers.
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