The outlook comes from mixed economic signals. The Federal Open Market Committee At its December meeting, the Fed cut the fed funds rate by 25 basis points, but the decision was disputed, with one governor voting for a larger cut, while two members disagreed that there would be no change.
“The projections released at this meeting show that the committee does not see a clear path forward,” the economists wrote in their comments.
Inflation remains above from the Federal Reserve while employment data released in mid-December showed wage growth has largely stalled since April. The unemployment rate rose to 4.6% in November, up from 4.4% in September, and MBA expects this to rise to 4.7% in the first half of 2026.
Mortgage interest rate forecast
Economists expect mortgage rates to remain within a narrow range through 2026, which could limit the housing market recovery and keep house prices largely flat.
“Mortgage rates have risen slightly over the past week, slowing the pace of refinancing applications at a time of year when the purchasing market typically slows sharply. Our forecast is that mortgage rates will remain in a narrow range, between 6% and 6.5%, for the next few years. This forecast becomes more likely as the Fed reaches the end of its austerity cycle next year,” the economists wrote in their commentary.
Inventory and house prices
In the housing market, rising inventory in many regions is giving buyers more choice and slowing price growth. MBA expects national home prices to remain broadly flat over the forecast period, with growth slowing to around 1% at the end of 2025 and turning slightly negative at the end of 2026 as demand declines.
New single-family mortgages are expected to increase modestly to $2.2 trillion in 2026, up from $2.05 trillion in 2025. New mortgages are expected to total $1.46 trillion as the inventory of existing homes improves and affordability gradually recovers.
Refinancing production is expected to increase from $694 billion to $737 billion.
The MBA also noted that it expects home prices to “stagnate nationally over the forecast horizon. Economists expect growth to slow to 1% by the end of 2025 and move slightly into negative territory by the end of 2026.”
Commercial and multifamily lending is also expected to increase. MBA predicts total commercial production of $784 billion in 2026, up from an estimated $637 billion in 2025, driven by refinancing activity and real estate acquisitions. Multifamily production is expected to rise to $393 billion by 2026.
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