NEW YORK–Consumers holding out hope that just general market trends or a new Fed chairman might lead to lower mortgage rates in 2026 will be disappointed by the new housing outlook for 2026 from J.P. Morgan.
The nation’s largest bank expects 30‑year fixed mortgage rates to “stay elevated at 6+%” in 2026, even if the Federal Reserve begins easing policy later this year, according to J.P. Morgan Global Research.
At the same time, U.S. home prices, which have nearly doubled over the past decade, are projected to “stall at 0% nationally in 2026,” meaning prices flatten on average rather than fall outright, J.P. Morgan said.
The Forecast
The J.P. Morgan housing forecast predicts:
- 30‑year fixed mortgage rates: Expected to remain above 6% in 2026, even with potential Fed cuts.
- Adjustable‑rate mortgages (ARMs): Could “tick downward if the Fed decides to ease, thereby making homes more affordable.”
- Builder buydowns: Homebuilders “are continuing to offer rate buydowns — in which they pay a sum upfront to help lower the buyer’s mortgage rate — in a bid to clear their inventory.”
Demand Could ‘Shift Higher’
“We think this could be enough, along with a rising wealth effect, to shift demand higher while supply increases subside. Consequently, we expect home prices to stall at 0% nationally in 2026,” John Sim, head of Securitized Products Research at J.P. Morgan, said in a statement.
Housing Supply
J.P. Morgan said this about the market:
- Estimated shortfall: About 1.2 million homes, not the 3–5 million often cited.
- Long‑term balance: Over the past 30 years, new household formations and housing completions “net out to nearly zero,” suggesting the structural gap is modest.
- Risk of overbuilding: “Overbuilding is a sure path to home price declines, and builders have been navigating an increasing supply of new homes,” said Sim.
- Recent trend: Housing supply has “climbed in recent months,” particularly in markets with heavy pandemic‑era construction.
The Lock-In Effect
In its analysis, J.P. Morgan argues that the biggest force keeping prices high is the “lock‑in” effect from ultra‑low mortgage rates, compounded by a weaker hiring market.
As the CU Daily reported here, Great Lakes Credit Union has introduced a new program aimed at addressing the lock-in effect and at boosting mortgage lending.
