Episode Summary:
In this episode of Real Investor Radio, Craig Fuhr and Jack BeVier engage with Odetta Cushi, the deputy chief economist at First American Financial, to discuss the outlook of the 2026 housing market. They explore various factors influencing the market, including economic trends, consumer spending, inflation, mortgage rates, and the impact of immigration. Odetta provides insights into the resilience of the U.S. consumer, the importance of equity levels, and the challenges faced by home builders. The conversation also touches on the myths surrounding the housing market and the potential effects of government policies on affordability. Overall, the discussion is cautiously optimistic about the housing market’s trajectory in 2026, despite existing challenges.
Episode Overview
In this episode of Real Investor Radio, Jack BeVier and Craig Fuhr sit down with Odeta Kushi, Deputy Chief Economist at First American. Together, they break down what investors should expect from the 2026 housing market.
At the outset, Kushi sets the tone: she is cautiously optimistic. Although 2025 challenged investors, 2026 should bring improvement. However, she does not expect a return to pre-pandemic normalcy. Instead, she anticipates gradual progress.
Rates, Inflation, and the Broader Economy
First, Kushi emphasizes the macroeconomic backdrop. The Federal Reserve has already cut rates, and policymakers now take a cautious, data-driven approach. Consequently, mortgage rates may stabilize rather than fall sharply.
At the present time, industry consensus suggests mortgage rates will hover near current levels. In other words, investors should not expect dramatic relief. However, inflation continues to trend toward the Fed’s 2% target. Services and shelter inflation have cooled, although goods inflation has shown some renewed pressure.
Equally important, consumer spending remains resilient. Because consumer spending drives roughly 70% of U.S. economic growth, its strength supports the broader economy. Nevertheless, cracks exist. Credit card delinquencies have risen, especially among younger and lower-income borrowers. Thus, while the average consumer looks stable, stress appears beneath the surface.
Home Prices and Equity Conditions
When asked directly about prices, Kushi projects low single-digit home price growth in the 2026 housing market. National appreciation has slowed significantly. Even so, she does not foresee a sharp national decline.
Above all, today’s market differs from 2008. Equity levels remain near historic highs. Additionally, debt-to-income ratios stay relatively low. Because widespread job losses have not materialized, the typical foreclosure triggers are absent.
For example, Austin experienced rapid pandemic growth followed by a correction. However, homeowners who captured earlier appreciation still hold meaningful equity. Accordingly, Kushi expects localized variation rather than systemic collapse.
Transaction Volume and the Lock-In Effect
Transaction activity remains constrained by the mortgage rate lock-in effect. Previously, 93% of borrowers held rates below 6%. Today, that share has fallen to 79%. As a result, the lock-in effect has eased modestly.
Inventory has also improved year over year. You cannot buy what is not for sale. Therefore, rising inventory should support a gradual pickup in transactions. Although volumes may not return to historic norms, they should trend upward.
Regional Differences and Rental Pressures
Real estate is local. Consequently, outcomes vary widely by region. Markets that built aggressively during the pandemic now face rent softness and higher inventory. Conversely, parts of the Northeast and Midwest show greater price resilience due to limited new supply.
Furthermore, immigration trends may influence both housing demand and construction labor. Slower population growth could dampen demand. At the same time, labor constraints could pressure builders’ costs.
Builders, Policy, and Affordability
New home builders have held a relative advantage. They can offer rate buydowns and incentives that existing homeowners cannot match. As a result, new construction has outperformed in several markets.
When discussing policy, Kushi stresses a supply-side solution. Demand-side subsidies often inflate prices. Instead, she argues policymakers should make it easier and more affordable to build. Although federal actions may help at the margins, most housing regulation occurs locally.
Final Takeaways for Investors
All things considered, the 2026 housing market should improve gradually rather than surge. Mortgage rates may remain steady. Home prices should rise modestly. Foreclosure risk appears contained.
However, investors must stay disciplined. Operating costs, insurance premiums, and tenant credit conditions still present risks. In sum, the market is thawing, but it is not easy.
Accordingly, real estate professionals should plan for steady progress, not perfection.
