February 16, 2026

The below transcript is a translation of the podcast audio that has been machine generated by Notta.

Hi everyone, my name is Taylor St. Germain with ITR Economics. Thanks so much for joining me on this episode of Trend Stock. We at ITR, you’re a political and unbiased source of economic intelligence. And today I wanted to talk about the housing market. We downgraded our housing forecast for 2026 and want to be very clear and blunt about what led to the downgrade and what the new expectation is.

So wanted to first highlight that we downgraded our 2026 outlook for US Single-Unit Housing Starts, we downgraded our 2026 forecast from moderate growth to contraction of about 5.7%. This was really as a result of the persistent affordability issues, the risk premium on mortgages and more existing homes coming on the market. That’s along with some builder concerns as measured by NAHB’s housing market index, it’s one of the leading indicators we use, that is the National Association of Home Builders. So we are still seeing these affordability challenges in the housing market persist. This has been a big challenge that we’ve been dealing with for quite some time. And even though if you look at median housing prices, which peaked in around $450-460,000 following the pandemic, median housing prices have come down to about $407,000 four hundred seven thousand. Mortgage rates, of course, are trending lower compared to where we were historically. The 30-year mortgage rate on a monthly basis sitting at about 6.18%, the 15-year sitting at about 5.48%.

So you might be asking the question of, you know, if median housing prices have come down and mortgage rates have come down, why are we still dealing with this affordability issue? Well, I think we need to put some things in context, right? Even though the 30-year mortgage rate has come down from the 7.4% that we saw at the peak following the pandemic, it’s still elevated. Same thing with the housing prices again, a change from about 460,000 to 407,000 on median, it’s giving some folks minor relief, but it’s just not enough relief to really spur this additional activity in the housing market. And we look at a great, great metric, which is housing affordability from a average household income or, I should say, a housing income surplus or deficit. So what I mean by that is we’re taking a look at each state around the country and better understanding which states are households in a surplus of affording a home, which states are folks in a deficit as it relates to affording a home. There’s really only two states that are in the positive territory. That is West Virginia and Louisiana. All of the rest of the country, including Alaska and Hawaii, is at a deficit from an household income standpoint to afford an average price home. So even though mortgage rates and housing prices might have come in a little bit here, it’s clear that households just aren’t getting the relief that they need to really enter this housing market. And that, of course, is having a big impact on starts.

I’ll give you some examples. You know, the average household in California is about $123,000 short of affording an average price home. Now, I’ll give you Texas in comparison, I know California and Texas are always competing with one another. The average household in Texas is about $18,000 short of affording an average price home. So, again, there’s still some massive affordability differences. I’m taking California at the extreme, Texas which is a little close to break even. But again, other than Louisiana and West Virginia, everyone is in the negative territory. Now, again, the southeast, Texas, the Midwest is a lot closer to those break even points. It’s really the coast, New England, California, Oregon, Washington, Utah, Colorado, those are the areas that we still find this deficit well above $50,000 for the average family. So, folks, we’re still grappling with some big affordability challenges. And as a result of that, we are more pessimistic on what the housing market will bear for 2026. Now, we do have the housing market returning to positive growth in 2027, being up point 8%. And then in 2028, we have that annual growth rate improving to 8.7%. But again, 2026, we will see a transition to recovery, but it’s not likely we get out of the negative territory until we’re in that ’27, ’28 timeframe.

I know this creates challenges, but it’s important to understand, despite the fact that I’m highlighting the national trend here, there are certainly regions around the country that are likely to perform better than others. And that’s how we can help. Please, we get great construction data, not just at the state level, but all the way down to the metro level. It’s important to understand for the home builders out there, for those of you servicing the housing market, this isn’t a one size fits all forecast. There are certain states, certain areas that are likely to perform better than others. I’ll continue to keep you updated on the housing market. Not a bad time for folks as it relates to potentially buying homes, but it is a lot harder for sellers out there right now with some of the weakness we’re seeing from the demand side.

And we’ll continue to keep you updated here. I certainly hope you found this information helpful. Thanks for joining me on this episode of TrendsTalk. Please like and subscribe to TrendsTalk, wherever you listen to your podcasts. Look forward to seeing you all in the next one. Thanks so much. Take care for now.