A housing recession
In the first Economic Update of 2026, America's Credit Unions Chief Economist and Vice President of Data and Research, Curt Long, dives into housing market data and what could shake out this year.
Buy vs. rent
"One of the few places in the economy that we can speak about definitively is housing, and the picture is not good," says Long.
He says the housing market is in a recession, with sales and construction declining over the past few years. However, he notes that apartment construction has risen and rents have been declining since mid-2022. This gives renters "more options, and more leverage, when they negotiate new leases" and allows them to wait out high prices for single-family homes.
The affordability issue
Housing costs are considered affordable when they make up 30 percent or less of household income. The median home price surpassed 30 percent of the median income in early 2022 and has not returned to affordable levels. Even though home prices declined in 2025, high interest rates are deterring would-be homebuyers, especially with rents also declining. Notably, home-buying sentiment is right around its all-time low, according to the University of Michigan.
Long adds that although home prices have remained flat for the past few months, it's mostly a sum of regional differences. The South and West have seen price declines. However, the Midwest and Northeast have seen increases. For example, home prices in Chicago have increased by nearly 4 percent, but have declined by around 5 percent in Miami.
Interest rates
"As you probably know, a big challenge for the housing market has been the lock-in effect of low rates," says Long. "Homeowners with 3- or 4-percent mortgages who might otherwise be looking to trade up are staying put because they don't want to increase their financing costs."
Even with that, the data has started to shift. A larger share of homeowners have mortgage rates above 6 percent, which "could provide some thawing of the lock-in effect" and create more home sales.
The year ahead
Long predicts the Federal Reserve could cut interest rates a couple more times this year. He concedes that there likely won't be a lot of demand for new mortgages but says that refinancing opportunities may be greater this year.
"We would probably need to see rates decline to the low 5s for that to happen. I'm not overly optimistic that we'll get that in 2026, but it is at least a possibility," says Long.
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