Here’s what matters more than rate cuts for US housing market in 2026

Logan Mohtashami, a senior HousingWire analyst, believes mortgage rate stability – not rate cuts – will be the key driver for the US housing market in 2026.

While many focus on the Fed policy, Mohtashami told CNBC today that the real story actually lies in whether mortgage rates can hold steady near 6% next year.

In fact, “it’s very hard for mortgage rates to go below 5.75% with monetary policy where it’s at,” he argued, noting consistency in rates is more important than chasing a dramatic decline.

According to him, mortgage rate stability could mean a modest but meaningful increase in home sales in the coming year.

Why mortgage rate stability tends to drive the US housing market

Historically, the US housing market responds best when mortgage rates avoid sharp swings.

“As long as mortgage rates stay near 6% and not shoot up again as they have in past years – we could get a little bit of sales growth in 2026,” Mohtashami said in a CNBC interview on Dec. 31.

In recent years, rate volatility has been a major challenge for the housing market, with sudden 1% moves disrupting affordability and buyer confidence.

By contrast, steady rates create a more predictable environment not just for the households, but for lenders alike.

All in all, mortgage rate stability offers a workable environment for buyers and sellers, preventing the kind of freeze seen when rates spiked above 7% in 2023.

Also Read: What to expect from the US commercial real estate market in 2026

What else signals housing market activity will improve in 2026

Mohtashami believes housing sales will grow “modestly” next year, also because mortgage spreads have improved.

In 2023, that metric stood at 3% versus about 2% only at the time of writing – a narrowing that’s helped mortgage rates remain near 6% even as amid a restrictive Fed policy, he noted.  

According to the HousingWire analyst, inventory growth may help ease pressure on buyers, while incremental wage growth outpacing home prices has improved affordability slightly as well.  

Taken together, these factors suggest that the market may not boom, but it will sustain modest sales growth next year – continuing the trend seen in 2025.

Labour market and policy risks remain

On the flip side, risks remain – Mohtashami agreed – adding the outlook could change if the labour market shifts the balance.

“Only reason mortgage rates are even here is that the unemployment rate has risen,” he noted.

If job growth accelerates, unemployment falls, and wage growth picks up, the Fed may adopt a more hawkish stance, pushing rates higher, especially since inflation remains about 1% above target – leaving little room for complacency.

In short, a stronger labour market would hurt affordability and stall sales growth. Conversely, if softness persists, rates may hold steady, supporting incremental demand for the US housing market in 2026.

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