Top Housing Economist Issues Grim Forecast Revision as Higher Rates Slam the Market

Lawrence Yun, the Chief Economist for the National Association of Realtors®, has revised his 2026 housing market predictions downward due to an unexpected rise in mortgage rates this year. He remarked to Realtor.com® that "markets are constantly changing—some have a positive impact on the housing market, and others, negative," highlighting the significant influence of increasing mortgage rates on his latest assessment.

In November, Yun had forecasted a 14% increase in existing-home sales for 2026 compared to the three-decade low experienced last year, along with a 4% rise in median home prices. However, by April, he had begun to lower his expectations, estimating only a 4% increase in existing-home sales volume from the previous year.

Yun pointed to several factors affecting his outlook, including elevated interest rates, inflation, and economic uncertainties stemming from the ongoing conflict in Iran. Currently, he anticipates that the volume of existing-home sales and home prices will see growth of around 2% or less this year compared to 2025. For new homes, he predicts a year-over-year decline of 5% in new-home sales.

The primary reason for this pessimistic revision, according to Yun, is the surge in mortgage rates. Initially, he expected mortgage rates to average 6.5% for the year, but they have since climbed, remaining above 7% since late September. At a recent conference held by the Mortgage Bankers Association, Chief Economist Mike Fratantoni projected that mortgage rates would remain around 7.3% for the remainder of the year and continue to stay above 7% through 2027. He attributed this trend to high inflation, which has prompted central banks to raise short-term rates, coupled with unsustainable budget deficits and debt, causing bond investors to increase long-term rates.

Looking toward the future, Yun's current predictions align closely with the midyear housing forecast update from the Realtor.com economic research team, released in July. This update indicated that due to factors like inflation, rising oil prices linked to the Iran conflict, and increasing interest rates, existing-home sales prices were expected to rise by only 1.2% by the end of the year.

During a recent event in Las Vegas, Yun expressed optimism that a decrease in mortgage rates in 2027 could prompt sidelined buyers to return to the market. He stated, "If somehow at the beginning of 2027 we see mortgage rates closer to 6%, we will see good buying activity at that time." Yun also suggested that an economic recession could potentially benefit the real estate market, citing historical trends where interest rates typically decline during recessions, leading to increased home sales.

"There’s so much uncertainty on geopolitics and, of course, the artificial intelligence and data center boom that is currently occurring," Yun noted. "What if it turns into a bust? It’s going to create a different dynamic." He added that, historically, in all economic recessions—except for the subprime mortgage crisis—interest rates decreased, and home sales rose more during recessions than in non-recession periods.

Julie Gerstein, a seasoned writer and editor based in Philadelphia, has previously held roles at Business Insider and BuzzFeed, focusing on various aspects of news and culture. She holds a B.A. in women's studies from the University of Pennsylvania and an M.A. in media and cultural studies from the University of Sussex.