September 8, 2025

Hi, everyone. My name is Taylor St. Germain with ITR Economics. Thanks so much 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. For those of you that follow along with our Trends Report, you will see that the housing market is in that phase D recession of the cycle. The housing market, and I’m referencing single-unit housing starts, I should say, the housing market’s down about 2.2%. And we do expect the single-family side of the housing market to remain sluggish through the remainder of this year. But again, if you’re paying attention to those growth rates in the Trends Report, you will see that we have positive numbers forecasted for 2026 and 2027. And while there are still some pretty big affordability challenges in the housing market, things are trending slightly in the right direction.

I wanted to just unpack this affordability challenge right now. If we look at the 30-year mortgage rate based on just monthly averages, so I’m not quoting the daily number, I’m quoting a monthly average. The monthly average on the 30-year is at about 6.79%. That is down from the 7.4% that we saw back in 2023. So are mortgage rates coming down? Slightly, but even that slight drop is helping out the affordability picture.

But really, I think what’s helping buyers more is the fact that housing prices have come in. So we look at new home median sales prices, and at the peak following the pandemic, that price was about $452,000 on median. Well, today we’re sitting at about $410,000 on median. So while the housing market is still characterizes as unaffordable for a lot of folks, we are seeing the affordability situation at least improving ever so slightly. And that, again, slight improvement in mortgage rates for buyers, lower mortgage rates, drop in housing prices, it’s helping buyers out. Now, when we think about the growth in 2026 and 2027, it’s really important to understand this relationship.

As we think about inflation, yes, ITR is forecasting higher inflation, we are forecasting higher interest rates as we move into 2026. However, the reason the housing market, or I should say one of the reasons the housing market’s going to grow is because we expect our incomes to outpace inflation. I’ll give you just a broad range. As we think about inflation through the second half of the decade from now until the end of 2029, we expect inflation to be up about 22% over that period of time. We expect incomes to be up about 28% over that time. So yes, even though housing is still an affordability challenge, having our incomes outpace inflation is going to be very important as we look at housing market growth, especially as we look at 26 and 27.

So for those of you that play into the housing market, or support the housing market, or are builders yourselves, we do expect to see more growth as we move into next year and into 2027. Again, an ever so slight affordability improvement is part of the equation but more so the fact that our incomes are going to continue to rise and outpace inflation. That’s good news for the economy, that’s good news for the housing market.

On future episodes I’ll continue to discuss inflation, labor costs, wages and will unpack this more but want to just highlight that for us this is a temporary lull on the housing market, we have it coming back next year in 26 and 27. Again, for more information on that head over to our Trends Report, that construction module within our Trends Report has a lot of great series including single-family housing and a number of others.

Certainly hope you found this information helpful. Thanks for tuning into this episode of TrendsTalk. Please like and subscribe to TrendsTalk wherever you listen to your podcast. I look forward to seeing you all on the next one. Thank you, take care for now