We expect the recent drop in mortgage rates to give the housing market a short-term boost, although buying activity will remain low by historic standards. We expect the 30-year fixed rate to stay above 6% as the Fed lowers its policy rate by less than investors expect and fears of reduced Fed independence boost the risk premium component of the 10-year Treasury yield. As a result, existing home sales will peak at just 4.3m annualised early next year before dropping back in 2026 and 2027. However, with supply still constrained, we still expect house prices to stabilise soon before rising by 2% in 2026 and 2027.
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