The housing market will continue to face several headwinds in 2026, according to economists speaking at the International Builders’ Show in Orlando, Fla., this week—including economic policy uncertainties, a softening labor market and ongoing affordability problems. But easing financial conditions, led by an anticipated modest reduction in mortgage rates, should help to (at least somewhat) offset market challenges and support production and sales.
“The housing outlook in 2026 is one of cautious optimism as builders contend with rising material and labor prices and policy uncertainty, while builders and buyers alike should benefit from anticipated fiscal and monetary easing that will moderate housing finance costs and mortgage rates,” said Robert Dietz, chief economist of the National Association of Home Builders (Washington, D.C.).
Regarding inflation, Deitz noted that shelter costs are running at a 3.6% annual rate and continue to outpace broader consumer prices. “With a nationwide shortage of roughly 1.2 million housing units, the best way to ease the housing affordability crisis is for policymakers to remove barriers that are hindering builders from building more homes and apartments,” he said.
Moreover, builders are facing persistent labor shortages, with the government reporting nearly 300,000 job openings in the construction industry in December. NAHB estimates that the residential construction sector will need to add roughly 740,000 workers a year just to keep pace with industry growth, retirements and departures.
