NEW YORK–A new analysis suggests America’s housing market is “flashing red” on multiple fronts, with affordability at its worst in years and little relief in sight, according to the authors of one new study.
Citing elevated mortgage rates, the general lack of affordability and a dearth of first-time home buyers, Capital Economics said it sees “no clear path to housing recovery,” with housing market activity stuck in a slump since 2023.
The reasons for its pessimism include:
- Mortgage rates stuck above 6.5%
- It’s not seen as a good time to buy
- Home sales recovery is weak and slow
- First-time buyers are especially hard hit
- First-Time Buyers Are Especially Hard-Hit
- In homebuilding, margins are squeezed and starts are slow
- In the rental market, demand strengthens as supply tightens
No Quick Fix.
“Affordability will remain stretched for the foreseeable future, with no clear trigger for a price correction,” Capital Economics said. “Home sales will stay muted, and the market will not recover meaningfully until mortgage rates fall and incomes catch up.”
Capital Economics’ analysis suggests landlords will be “winners from this environment, as they’ll have room to raise rents from such tight market conditions.”
Capital Economics is forecasting rent growth of 2% in 2025 and 3.5% in 2026.
