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- The Mortgage Bankers Association predicts slow economic growth of 1.5 to 1.7 percent between 2026 and 2028, with a 35 percent chance of a recession and unemployment rising to 4.7 percent in early 2026.
- Home sales are expected to exceed five million by 2026, driven by rising inventories and moderating home prices, with sales of existing homes rising by almost 7 percent and sales of new homes by 6.5 percent.
- MBA predicts mortgage rates will stabilize between 6.2 percent and 6.5 percent through 2027, while Fannie Mae expects rates to be below 6 percent by the end of 2026, indicating some divergence in projections.
- National home prices may fall in the second half of 2026 due to increased supply and weaker demand, with price growth expected to resume in late 2027, according to MBA economists.
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Home sales should break the 5 million mark next year as more inventory gradually comes onto the market and home prices fall, economists at the Mortgage Bankers Association predict.
The economy is expected to remain sluggish over the next three years, but home sales will rise as mortgage rates stabilize in the mid-60s, economists at the Mortgage Bankers Association say.
The MBA is December economic and mortgage forecasts forecast that there is a roughly 35 percent chance of a recession next year, with unemployment likely to rise to 4.7 percent in the first half of the year.
Although signs point to economic growth of 1.5 to 1.7 percent below trend from 2026 to 2028, home sales should break the five million mark next year as more inventory gradually comes onto the market and home prices fall, MBA forecasters say.
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“Our forecast is that mortgage rates will remain within a narrow range, between 6% and 6%, in the coming years [percent] and 6.5 percent,” MBA forecasters Mike Fratantoni, Joel Kan and Judie Ricks said in a commentary accompanying their forecast. “This forecast becomes more likely as the Fed reaches the end of its austerity cycle next year.”
Mortgage interest rate forecasts vary
Source: Fannie Mae (November) and Association of Mortgage Bankers (December), predictions for 2025.
Federal Reserve policymakers approved their third interest rate cut of the year on December 10, but issued economic projections that suggested they might cut rates just once next year. The latest wage and employment data released on December 16 shows the unemployment rate rose to 4.6 percent in November. 7.831 million Americans without work.
Economists at Fannie Mae predicted in November that interest rates on 30-year fixed-rate loans will fall below 6 percent by the end of next year. Fannie Mae’s latest forecast had not yet been made public as of December 22.
MBA forecasters this month are sticking with the mortgage rate forecast they issued in November, which projected rates to average 6.4 percent through 2026 and 6.3 percent for much of 2027.
“The government shutdown continues to impact the availability and timeliness of key economic data,” MBA forecasters said. “Our overall outlook remains similar to previous months, but is certainly subject to change as more data comes in.”
Home sales are expected to reach 5 million in 2026
Source: Mortgage Bankers Association Forecast December 2025.
The MBA estimates that home sales will grow less than 1 percent to 4.793 million by 2025. But sales of existing homes are expected to rise almost 7 percent to 4.372 million next year, while sales of new homes will also rise 6.5 percent to 735,000.
“Housing inventory continues to grow in many markets across the country, and this increased supply has contributed to the increase in purchasing activity as homebuyers have more options to choose from and home price growth continues to moderate, with outright declines in home prices in a growing number of markets,” MBA economists said.
Sales of existing and new homes are expected to continue to grow by more than 3 percent annually in 2027 and 2028.
Will house prices fall next year?
Source: Fannie Mae (October) and Association of Mortgage Bankers (December), predictions for 2025.
MBA economists expect national home price growth to turn negative in the second half of next year due to rising inventory levels and weaker demand, and not show positive growth until the fourth quarter of 2027.
Fannie Mae’s home price forecast, last updated in October, predicts home price growth will cool to 1.3 percent late next year but remain positive.
Refinancings have increased by 22% this year
Source: Mortgage Bankers Association Forecast December 2025.
The significant drop in mortgage rates in 2025 – from 7.05 percent in January to a Lowest point in 2025: 6.12 percent in October, according to lender data tracked by Optimal Blue, mortgage refinancing volume rose 22 percent in 2025, to an estimated $694 billion.
Rising home sales are expected to increase mortgage production by nearly 8 percent to $1.461 trillion next year, while refinancing volume will also grow 7 percent to $737 billion, as ups and downs in mortgage rates create “short windows” of refinancing opportunities.
While purchase loan volume is expected to grow 3 percent in 2027 and 2 percent in 2028, refinancing volume is expected to decline below 2025 levels as mortgage rates stabilize.
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