The housing market entered summer with a spring in its step after a relatively positive start to the year, marked by growing home sales and easing asking prices. The ongoing conflict in Iran kept upward pressure on inflation and mortgage rates, limiting more significant progress, but recent data offers real reason for optimism. Both headline and core inflation fell more than expected in June, and if the conflict moves toward resolution, lower borrowing costs could follow.
With the year now at its midpoint, we have revised our expectations for the housing market. The market is still expected to outperform 2025, but some early-year headwinds have moderated our projections. Mortgage rates are expected to average around 6.3% for the year, down slightly from 2025. Home sales and prices are both expected to tick higher, and rents are expected to fall. Buyers should see some relief in monthly housing costs, though affordability will remain a challenge.