The housing market highlights warning signs about high mortgage rates and General Z and Millennial for the first time buyers for the first time, says Capital Economics

1. Mortgage rates are stuck above 6.5 %

• Real estate mortgage rates are expected to remain above 6.5 % during the year, as the Federal Reserve is not expected to resume discounts in price rates until 2026.
• High rates keep the monthly payments high, which leads to the removal of many potential buyers from the market.

2. It is not seen as a good time to buy

• The share of families that says the time to buy a house is near its lowest level ever.
• High houses prices, narrow supplies, and high borrowing costs are merged to make home ownership less susceptible to any time in modern memory.
• Even with the inclusion of more homes, the total total remains low according to historical standards, providing little comfort for potential buyers.

3. House sales recovery is weak and slow

• The current homes sales are expected to be faded, reaching an annual pace of 4.3 million in 2026 and 2027-less than prenatal standards.
• The market remains in a state of prolonged recession, with an activity that is unlikely to recover useful until the ability to withstand costs improves.
• There is no clear operator for price correction: It is expected that home prices will increase by 1 % in 2025 and 2 % in both 2026 and 2027, making the market far for many.

4. Buyers for the first time are especially difficult

• Buyers for the first time (FTBS) face the most difficult conditions in decades. Last year, only 1.1 million purchases of FTB purchases – on a historical average.
• This is difficult for Gen Z and Millennial Generations who want to storm the housing market, because they are an overwhelming majority of the age of most historical FTBS, from the late twenties to the early 1940s.
• High borrowing costs and the lack of household shares that make it particularly difficult for newcomers to storm the market.
• Although it is expected that the mortgage payments are expected to be given a little income (less than 35 % of the Mediterranean FTB income decreased in 2026), any recovery in FTB activity is expected to be modest at best.

House construction: compact margins, start slow

• House builders kept sales standing on their feet by lowering prices and offering incentives, but high construction costs – especially from customs tariffs on wood – enhance margins.
• The beginnings of a single family housing are expected to drop to 900,000 by the end of 2016, before a slight recovery in 2027.
• New homes sales are still strong, but mainly because the housing market has a structural deficiency of the current homes offered for sale. Also, the “new construction installment”-the additional buyers who usually pay for new real estate-disappeared as budget buyers compete.
• Price cuts and longer time in the market: 20 % of the lists now include a decrease in prices, and the average time in the market is 45 days near prenatal levels.

Rent Market: The demand is strengthened with the tightening of the supply

• The demand for rent increases with increased access to home ownership, especially for younger adults. For children between the ages of 25 and 34, it is costing to have a starting house now more than 50 % of average income, compared to less than 39 % for leasing.
• Vacancies have decreased: The vacancies rate in the apartment is expected to decrease from 6.4 % to 5.4 % by the end of 2027.
• Rental growth is to accelerate: after a period of wrong increases, lease growth is expected to reach 2 % in 2025 and 3.5 % in 2026.
• The multi-capacity construction slows down sharply, as it is expected to rise gradually to 430,000 by 2027-less than the postpartum mutation.

Expectations: There is no quick solution to housing problems

• The ability to withstand costs will remain extended in the foreseeable future, with no clear operator to correct prices.
• House sales will remain silent, and the market will not be recovered useful until mortgage and income follow -up rates decrease.
• The owners will be winners of this environment, as they will have space to raise rents from these narrow market conditions. Capital Economics is expected to grow 2 % in 2025 and 3.5 % in 2026.

In short, the housing market in the United States has been appointed to restore slow grinding, as buyers face continuous challenges of the ability to withstand costs and rents up due to the continuous freezing of activity for sale.

For this story, luck The artificial intelligence is used to help with a preliminary draft. Check an editor of the accuracy of the information before publishing.