November 17, 2025

Hi everyone, my name is Taylor St. Germain with ITR Economics, thanks for joining me on this episode of TrendsTalk. We at ITR are your apolitical and unbiased source of economic intelligence and today I wanted to provide an update on the housing market.

It’s been a number of months since we dove into the housing market on TrendsTalk, I wanted to provide you all with an update. I’ll remind you all that when I refer to the housing market, I’m talking about US Single-Unit Housing Starts. It’s one of our Trends Report series. And I wanted to kick things off by first off saying that we believe we’re approaching the low point of the cycle for the housing market. Our 2025 forecast for US Single-Unit Housing Starts is that we hit 959,000 units. That is a minus 5.3% annual growth rate. So we are expecting the housing market to finish down about 5% in 2025 compared to the full year of 2024. Of course, we’ve still been grappling with affordability challenges really around the country. And I’ll dive into a few of these trends here in just a moment, but I wanted to highlight the path moving forward.

In 2026, we have the housing market reaching above 1 million units and growing at about a 4.7% growth rate. So again, that’s a year-over-year growth rate, so we expect ’26 to finish up 4.7% compared to ’25. Then we expect another almost 3% growth in 2027. So for those developers, for those companies that support the housing market from a supply standpoint, we are expecting more demand to come out of Single-Unit Housing as we move forward.

We have seen a mild improvement, is what I’d say, a mild improvement in the affordability situation. If we look at the quarterly trends in terms of percentage for mortgage rates, we have seen the mortgage rate on the 30-year come down to about 6.25, and we’ve seen that 15-year come down to almost 5.5. So we are seeing mortgage rates trending slightly lower. That’s helping folks out from an affordability standpoint. And then when we look at median sales prices of new homes, that has come down from its post-pandemic peak. Post-pandemic, we were at about $442,000 for median housing price. And since then, we’ve seen those prices come in to about $410,000. So we are getting a little bit of mortgage rate relief. I say a little bit, and that is the key technical phrase I’d use there. And we are seeing a little bit of alleviation on the pricing side as well.

Now, what’s really key to our forecast in terms of driving the housing market forward, as I mentioned, positive growth rates for ’26 and ’27, is the fact that we are expecting consumer incomes to outpace inflation. So yes, I’m not saying that we’re going to see some massive decline in housing prices or significant mortgage rate reduction, but with a little bit of alleviation on both those fronts, combined with higher incomes moving forward, we expect that’s going to lead to some positive years in the housing market.

Now, when we look at the affordability situation around the country, we look at, our data team which is our fantastic group of folks that put together this chart for us, and it shows the different states around the country, and it shows the average household income from a surplus or deficit standpoint needed to afford an average price home. What we see is that most states around the country are still in the negative, which it means most average individuals are at a deficit to affording an average price home. I’ll give you the extremes. The biggest extremes are Hawaii and California, where in Hawaii, consumers are at about a $156,000 deficit to afford an average price home, and in California, it’s about $123,000. So there are still some massive affordability challenges in certain areas of the country.

Now, there are other areas where we’re actually in the positive. Louisiana, West Virginia are two states where consumers actually have a surplus, and housing is much more affordable. But again, other than those two states, pretty much everyone around the country is in the negative. It’s just that some states are a lot less negative than others. So while you might be at a deficit of $150,000 in Hawaii or $120,000 in California, you’re only at a deficit of $21,000 in South Carolina, or $18,000 in Texas. So it comes down to what we often call an ugly dog contest, which is most of the states are pretty ugly from an affordability standpoint, but who’s the least ugly? And there are a lot of states that are at least trending closer to the break even than some of those states out on the coast.

So it’s very interesting. We expect regional performance in the housing market to vary substantially over the next few years based on these affordability challenges. But again, the good news, the overall takeaway is we have Single Family Housing growth in ’26 and ’27. So even though ’25 was a tough year, we’re always challenging you to think a business cycle ahead. And if you’re thinking that way, you’re preparing yourself for what we see as two years of growth for single family housing. It’s going to be interesting to see how the Fed approaches interest rates, what it means for mortgage rates. And I will continue to keep you updated there, as well as my colleague Lauren on Fed Watch, you can head over to her series, her podcast and learn more about interest rates, their impact on mortgage rates.

There’s good news building out there. Let’s be careful about reading too much into the media and really look at what the data is telling us. Thanks so much for joining me on this episode of TrendsTalk. Please like and subscribe to TrendsTalk wherever you listen to your podcasts. I look forward to seeing you all in the next one. Thanks so much. Take care for now.