No clear path to housing recovery

Activity in the housing market has been struck in a slump since 2023, with still no end in sight. As Trump’s immigration and trade policies push up inflation this year, the Fed will be forced to keep policy restrictive – preventing mortgage rates from dropping much below current levels. While recovering existing home inventory will continue to restrain growth, home prices will still grind higher over our three-year forecast, with no clear trigger for a correction – offering budget-constrained would-be buyers little relief there either. Overall, with affordability remaining stretched and Trump’s stagflationary policies causing economic growth to slow, transactions will remain weak, rising to a peak of 4.3m annualised by end-2027. The main beneficiary of the frozen for-sale market is the rental market, where strong demand is set to continue. With supply dropping back sharply too, we expect the apartment vacancy rate to fall from current elevated levels to 5.4% by end-2026, pushing rent growth to 3.5% in 2026.