May 19, 2026 – Searching For Direction

Economic Commentary

It is not only the jobs data which is hard for us to decipher this year. It is also the state of the economy and especially the real estate market as well.  There is always a modicum of uncertainty attached to the economy every year.  But this year seems to be somewhat of a special case.  If you want to imagine the economy as a recipe, we never know how the mix of ingredients will come together as a finished dish. This year we have the normal mix of ingredients, but we add and subtract some special sauces to the equation.

What are we adding? Two major ingredients are the on and off tariffs and the conflict in the Middle East which has snarled shipping traffic significantly and has contributed to a rekindling of inflation. What are we subtracting?  In this case population growth — as we have not only deported immigrants but also slowed the pace of legal immigration while birth rates have lagged as well. One might think that the economy is poised for a major contraction as a result of these factors, but not all these ingredients are negative for the economy. For example, increased defense spending can boost economic growth.  Other factors are hard to discern such as the effect of tariffs.

Which brings us to the real estate sector of the economy. Here we have an even more complicated mix of ingredients. For example, the real estate market has been slow for the past few years. This has created latent demand, which was really percolating at the start of the year as interest rates moved to multi-year lows. A rise in rates due to the conflict has stemmed this demand somewhat but has certainly not turned it off.  Plus, we can subtract another ingredient. The lock-in effect of homeowners who have been keeping their homes off the market due to low rates achieved during the pandemic has started to ease as life moves on. Regardless of the future of rates, this latent demand and easing lock-in effect are factors that will influence the market as the year progresses.

Weekly Interest Rate Overview

The Markets. Mortgage rates were flat this week, though there was a lot of volatility due to the lack of Iran conflict peace progress and elevated inflation numbers released. According to the Freddie Mac weekly survey, 30-year fixed rates fell slightly to 6.36% last week from 6.37% the previous week. In addition, 15-year loans also decreased one tick to 5.71%. A year ago, 30-year fixed rates averaged 6.81%, 0.45% higher than today. Attributed to Freddie Mac: “Mortgage rates ticked down this week, averaging 6.36%. While purchase demand is softening, it remains above this time last year. Recent data also shows existing-home sales modestly edging up.” Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

Real Estate News

The latest homeownership rate declined to 65.3% in the first quarter of 2026, according to the Census’s Housing Vacancy Survey (HVS). While this was a modest quarterly decrease, the broader picture continues to reflect significant affordability challenges. Compared to the peak of 69.2% in 2004, the homeownership rate is currently 3.9 percentage points lower and remains below the 25-year average rate of 66.3%. Compared to the previous year, homeownership rates decreased in only two age groups. Householders aged 45-54 experienced the largest drop, declining by 1.4 percentage points from 70.6% to 69.2%. Homeownership rates for householders aged 65 years and over declined 0.6 percentage points from a year ago. Among younger households, the homeownership rate for those under 35 increased 0.2 percentage points to 36.8% in the first quarter of 2026. The national rental vacancy rate inched up to 7.3% for the first quarter of 2026, on a steadily increasing trend since 2023. Meanwhile, the homeowner vacancy rate stayed at 1.1%. The upticks in both homeowner and rental vacancy rate signal an increase in the existing home supply.  The housing stock-based HVS revealed that the number of total households increased to 133.7 million in the first quarter of 2026 from 132.1 million a year ago. This increase was driven by both owner and renter household growth. Source: The National Association of Home Builders

Coldwell Banker Real Estate LLC released its 2026 Home Shopping Season Report, identifying the key trends driving the U.S. housing market this spring. Despite ongoing geopolitical uncertainty, real estate agents report a market shaped by sellers beginning to let go of historically low mortgage rates and buyers who are re-entering the market with renewed intent – but are more cautious and discerning than in years past.  The findings are based on a survey of more than 700 real estate agents nationwide, offering a real-time snapshot of the 2026 spring housing market. Early indicators point to renewed buyer and seller activity, with 43% of agents reporting a busier home shopping season than last year. “We are seeing activity on both sides of the housing market this spring, but it is measured,” said Jason Waugh, President of Coldwell Banker Affiliates. Homeowners are beginning to let go of historically low mortgage rates, signaling a potential shift in one of the biggest and most persistent constraints on housing supply. For many sellers, the decision to list is less about timing the market and more about necessity. Seventy-seven percent of agents surveyed say they are working with homebuyers who are re-entering the market after previously pausing their search. Eighty percent of agents say homebuyers this spring are actively on the market and are not waiting for market conditions or rates to drop further before purchasing their next house.  Buyers are increasingly factoring in environmental risks, as well as climate-influenced costs like home insurance, into their purchasing decision – especially in regions most exposed to extreme weather. Source: Coldwell Banker

To encourage expansion of the affordable housing stock in the U.S. that would not otherwise be built without public support, municipalities are increasingly incentivizing mixed-income properties. Municipalities will approve construction plans for market-rate apartments so long as a percentage of total project units meet affordable or workforce housing income requirements. Developers are leveraging demand for affordable housing and new mixed-income property regulations to propose projects that may otherwise fail to earn approval. By including a percentage of affordable housing units in their multifamily projects, developers gain approval for the market-rate units that may not have been greenlit due to zoning restrictions or other permitting regulations at the municipal level. Many tax abatement programs exist across the U.S. to reduce or eliminate taxes for individuals or businesses pursuing economic development in specific areas. Program eligibility requirements vary widely and include provisions related to factors such as rent stabilization compliance, the duration that affordable units must be offered to would-be tenants, and the share of units requiring rent subsidies based on area median income metrics. These considerations are designed to boost volumes of much-needed affordable and workforce housing units, as professionals in the fields of teaching, nursing and emergency response are increasingly being priced out of housing in the communities where they work.   Even with bipartisan legislative efforts to bolster affordable housing stock nationwide and alleviate housing cost pressure — particularly after vigorous house price appreciation during the COVID-19 pandemic exacerbated affordability issues — the development pipeline is starting to dwindle. Approximately 45,000 affordable housing units were expected to be brought online across the U.S. in 2025, but only 17,000 were delivered through the first half of the year. Nearly 50,000 additional units are expected in 2026, based on projects in developers’ pipelines.  Source: Scotsman Guide