Barry Habib’s 2026 housing forecast

Overview

Session Notes

• Key Takeaway: Barry Habib expects easing inflation and a softening labor market to push the Fed toward rate cuts in 2026, bringing mortgage rates into the mid-5% range. With housing supply still constrained, even modest rate relief is likely to unlock pent-up demand and drive national home price appreciation of roughly 3–3.5%.
• Barry’s strong track record on forecasting rates, spreads, and unemployment in 2025 supports confidence in his 2026 outlook, which centers on falling inflation, labor-market cooling, and a shift toward accommodative Fed policy.
• Official inflation data likely overstates price pressures due to shelter measurement distortions, while real-time rent data, elevated vacancy, and alternative inflation metrics suggest true inflation may already be near the Fed’s 2% target.
• The labor market is weaker than headline indicators imply, with rising continuing claims, growing long-duration unemployment, declining job openings, and overstated job creation data pointing toward mounting economic fragility.
• Tariffs represent a temporary inflation shock rather than a lasting inflation driver, and their effects should fade by mid-2026, further clearing the runway for Fed easing.
• Barry expects the Fed funds rate to fall from roughly 3.65% to near 2.9%, pushing the 10-year Treasury toward 3.8% and allowing mortgage spreads to normalize, resulting in a likely mortgage-rate floor near 5.6%.
• With household formation delayed but not destroyed, lower rates would rapidly unleash sidelined demand, while builders’ recent pullback in new supply sets up a renewed imbalance favoring price appreciation.
• His base case projects roughly 3.5% national home price growth in 2026, with tighter inventory markets — particularly across the Northeast — outperforming.
• Leadership Lens: Housing leaders should prepare for a sustained recovery cycle, not just a short-term bounce. Lower rates, easing inflation, and improving affordability will reignite buyer demand, intensify competition for limited inventory, and create opportunities to educate clients on timing, leverage, and long-term wealth creation. Leaders who proactively guide buyers before rates fall further—and position inventory strategically—will capture outsized market share as transaction volumes accelerate.