"Existing home sales may rise in 2026 if mortgage rates remain near 6% and inventory stays stable. Normalized mortgage spreads and improved supply conditions support the outlook for growth. AI Summary Existing home sales have had a nice rise since mid-June, but what will it take for this sales growth trend to continue in 2026? Over the last few years, when rates drop noticeably, sales pick up, but then mortgage rates have shot up over 7% and taken away housing's momentum."
"Mortgage spreads have been very damaging to housing demand over the past few years, as they've kept rates more elevated than normal. However, 2026 will be the first year when spreads start the year close to normal and can be back in their normal range this year This means mortgage rates have a better shot of staying lower for longer. This usually happens when the rate-cut cycle is well underway, which it has been since September 2024."
"As you can see below, the spreads are roughly back to their normal range of 1.60%-1.80%; we are at 1.88%. To give you an example, if mortgage spreads were as bad as they were in 2023, rates would be over 7% today, not 6.07%. In HousingWire's 2026 forecast, the upper end of mortgage rates is 6.75%, meaning this is the first time in years I haven't forecasted a 7-handle in the yearly range."
Existing home sales have risen since mid-June and could continue gaining in 2026 if key conditions hold. Mortgage spreads that previously elevated borrowing costs are returning toward normal, improving the chance that mortgage rates remain lower for longer as the rate-cut cycle has been underway since September 2024. Spreads are roughly back to the normal 1.60%-1.80% range, around 1.88% currently, which keeps rates near 6% instead of exceeding 7%. Housing demand will receive additional support from the White House's ordered sale of $200 billion of mortgage-backed securities. Labor market strength could push rates toward the high end of forecasts.
Read at www.housingwire.com
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