The Outlook for US Housing in 2027 amid Rising Mortgage Rates

Summary

• Rising mortgage rates are expected to outweigh the US housing shortage in 2027, reducing both existing home sales & new construction.
• Economists Ronnie Walker & David Mericle project existing home sales will total 3.9 million in 2027, which is 26% below 2019 levels.
• Home price growth is forecast to be anemic at 0.8% December-over-December in 2027, following 1.1% in 2026 & 1.2% in 2025.
• Borrowing costs have increased due to the Iran War, higher oil prices, & Federal Reserve rate hike prospects, creating a "lock-in" effect.
• More than 95% of mortgage borrowers have interest rates below current market rates, with 65% holding rates two percentage points lower.
• The combination of mass refinancing in 2020 & 2021 & high current rates has created significant financial costs for moving.
• 30-year mortgage rates reached 7.32% as of October 22.
• Goldman Sachs Research expects mortgage rates to decline to 6.4% in 2027, though affordability will remain at historically poor levels.