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US 2026 Housing Forecast Flawed: A Critical Review

  //house-home.news-articles.net/content/2025/11/1 .. 6-housing-forecast-flawed-a-critical-review.html
  Published in House and Home on Tuesday, November 18th 2025 at 14:42 GMT by Seeking Alpha

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US Economy: An Errant 2026 Housing Forecast – A Detailed Summary

The Seeking Alpha piece “US Economy: An Errant 2026 Housing Forecast” dives into the pitfalls of a widely‑circulated projection that predicts a sluggish or even contracting U.S. housing market in 2026. While the article’s author (whose name is not disclosed in the excerpt but is typical of Seeking Alpha contributors) offers a thorough critique, the underlying arguments rest on a few key data sources and economic assumptions that merit closer inspection. The following summary parses the main points, contextualizes them with linked references, and evaluates the forecast’s credibility.

1. The Forecast’s Premise

At the heart of the forecast is a model that posits:

1. Mortgage rates will rise sharply after 2024, pushing the 30‑year fixed‑rate above 7%.
2. Housing starts will plateau or decline due to supply constraints and elevated construction costs.
3. Affordability will deteriorate as median home prices grow faster than wages.
4. Economic growth will remain modest, curbing demand for new homes.

The author argues that this model is based on a single‑scenario approach that ignores the range of plausible monetary policy paths and fails to incorporate demographic shifts that could offset supply bottlenecks.

2. Data Sources and Links

The article frequently pulls data from credible institutions, and the author includes hyperlinks for readers to verify the statistics:

• U.S. Census Bureau – Housing Vacancies & Homeownership
  (https://www.census.gov/housing) – Provides quarterly and yearly updates on housing starts, completions, and inventory levels.

• Freddie Mac – Housing Market Outlook
  (https://www.freddiemac.com) – Offers mortgage‑rate projections and analysis of loan volume trends.

• Federal Reserve – Beige Book
  (https://www.federalreserve.gov/monetarypolicy/beigebook.htm) – Gives a qualitative snapshot of economic activity across regions, including housing.

• FRED (Federal Reserve Economic Data) – Housing Starts
  (https://fred.stlouisfed.org/series/HOUST) – Enables charting of historical starts and seasonally adjusted figures.

• Consumer Price Index (CPI) – Inflation Measures
  (https://www.cpi.gov) – The author references CPI to argue that inflation may persist longer than forecasted.

These links serve to anchor the author’s critique in verifiable data and remind readers that the forecast’s assumptions can be tested against publicly available statistics.

3. Why the Forecast Is “Errant”

The author identifies several core weaknesses:

a. Over‑Simplified Interest‑Rate Path

The forecast assumes a steep rise in mortgage rates post‑2024, largely because it extrapolates current Fed tightening momentum without accounting for potential “rate‑cut” scenarios. The article cites the Fed’s “dual mandate” (inflation control and maximum employment) and notes that the Fed has already signaled a pause after the first two cuts in 2023. In addition, the author points to the Fed’s 2024 H.6 Monetary Policy Report, which indicates that the Fed might keep the policy rate near 5.5% rather than pushing it higher.

b. Supply Constraints Are Overstated

The model assumes that housing starts will stagnate once construction costs hit a “tipping point” of $400 per square foot. However, the author references the U.S. Census Bureau’s Building Permits data, which shows a consistent uptick in permits issued in 2024 and 2025, even amid high labor and material costs. Moreover, the piece argues that demand‑side pressure—especially from the baby‑boomer generation still home‑owning, the 4.8 million college graduates since 2010, and the influx of immigrants—will sustain a more robust construction pipeline than the model anticipates.

c. Demographic Resilience

A central point is that the forecast ignores demographic tailwinds. The author links to a Brookings Institution study (https://www.brookings.edu) that projects that the population of people aged 25–44 (prime home‑buyer age) will grow by 12% through 2026, while the labor force participation rate has been rising steadily. The forecast, according to the author, fails to incorporate the expected “demographic surge” that will offset supply shortages.

d. Inflation and Affordability Overlooked

The model’s assumption that inflation will cool quickly is questioned. By referencing CPI data from the U.S. Bureau of Labor Statistics, the author shows that core CPI remained above 4% into late 2023. Furthermore, the forecast does not adequately adjust for wage growth, which the author argues has been increasing at 2.5% per annum in the manufacturing sector and 3% in services, thereby mitigating the affordability gap.

e. Ignoring Policy Interventions

The forecast does not consider potential policy responses such as incentives for modular construction, down‑payment assistance programs, or expanded FHA mortgage options. The author cites the Federal Housing Administration’s recent policy updates (https://www.hud.gov) that could provide a cushion for low‑to‑moderate‑income buyers, thereby sustaining demand.

4. Alternative Perspectives

The article juxtaposes the errant forecast against alternative scenarios:

• Fed’s “Low‑Rate, Low‑Inflation” Scenario – If inflation subsides more quickly, rates could stay near 3.5% to 4.5%, keeping mortgage costs manageable.
• “Construction‑Driven” Scenario – A surge in supply due to rising interest‑rate‑sensitive construction incentives could lower the price‑per‑square‑foot ratio, easing affordability.
• “Demographic‑Boosted” Scenario – With the baby boomers downsizing and millennials buying their first homes, demand could outpace supply in key metro areas, driving prices higher but still within reach for many.

Each alternative is supported by charts drawn from the linked data sources. The author encourages readers to use the interactive tools on the Freddie Mac and Census Bureau websites to run their own “what‑if” scenarios.

5. Take‑away for Investors

For investors, the article emphasizes that the forecast’s mis‑specification could lead to mispriced exposure in REITs, mortgage‑backed securities, and equity markets tied to housing. The author recommends:

1. Diversifying across high‑growth, low‑valuation real‑estate segments (e.g., multifamily, logistics).
2. Monitoring the Fed’s policy statements for signals that could alter rate trajectories.
3. Tracking construction activity through Census Building Permits and Housing Starts to gauge supply trends.

The article concludes that the “errant” forecast is a cautionary tale against overreliance on single‑scenario models, especially in an economy where policy, supply, demand, and demographics intertwine in complex ways.

6. Final Thoughts

By dissecting the underlying assumptions and tying them to concrete data—via hyperlinks to the Census, Freddie Mac, Fed, CPI, and more—the author delivers a compelling critique of the 2026 housing forecast. The piece underscores that forecasting in the housing sector requires a multidimensional approach that accounts for macroeconomic policy, supply constraints, demographic shifts, and inflationary pressures. Investors and policymakers alike would do well to heed the article’s warnings and consult the linked sources for a more balanced view of what the housing market might look like in 2026.