NAR Revises 2026 Forecast as Rising Rates & Inflation Slow Recovery

 


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NAR’s Dr. Lawrence Yun cuts his 2026 housing forecast, slashing projected existing-home sales growth from 14% to 4% as rising rates and inflation hit demand.

The 2026 rebound story has officially hit a snag. 

The early signals are already showing up in slower sales activity and a more cautious buyer pool, setting the tone for a year that for many feels tighter than expected.

The National Association of REALTORS® has now formalized that change in direction. 

Dr. Lawrence Yun revised down his existing-home sales forecast by 10 percentage points, while also pulling new-home sales expectations back to flat. His update shows a market responding quickly to higher borrowing costs and softer demand conditions.

NAR’s 2026 Forecast Downgrade

NAR came into 2026 expecting a 14% jump in existing-home sales, but is now projecting 4%. Dr. Yun is pointing to affordability pressure and a slow start to the year as reasons to dial expectations back.

The original expectation was that 2026 would pick up speed, however, the start of the year has shown that a quieter year is more likely. Prices are still holding, which says more about tight supply than about any real surge in demand. 

Key forecast revisions and recent performance data:

  • Existing-home sales growth: revised to +4% for 2026 (down from +14%)

  • New-home sales growth: revised to 0% (down from +5%)

  • Existing-home price growth: projected at +4% (unchanged)

  • Existing-home sales (latest report): 3.98 million seasonally adjusted annual rate

  • Month-over-month sales change: −3.6%

  • Year-over-year sales change: −1%

The data backs up the downgrade in NAR’s forecast. Sales dipped month-over-month and year-over-year, and buyers have been sitting on the fence while financing costs stay elevated. 

Mortgage Rates Are Driving the Downgrade

Rates were supposed to average around 6% this year. They’re now projected to average 6.5%, and are currently at 6.32% after sitting at 5.98% in February. 

With higher rates, fewer people are actively buying, and that’s showing up in the transaction data this spring.

Key mortgage rate trends and projections:

  • Current mortgage rate: 6.32%

  • February mortgage rate: 5.98%

  • Previous 2026 average rate forecast: ~6.0%

  • Revised 2026 average rate forecast: 6.5%

  • Expected near-term rate level: above 6%

Going from 6% to 6.5% on a typical loan adds a meaningful chunk to the monthly payment, enough to push some buyers out of their budget entirely. NAR factored that reality into the revised forecast, and it’s a big part of why the full-year outlook got scaled back.

Inflation and Energy Shock Are Setting the Tone

Inflation jumped to 3.3% in March, up from 2.4% in February. Most of that came from one place: energy. Gas prices rose 21.2% in a single month, driven by the Middle East situation. When oil spikes, inflation follows, and when inflation runs hot, mortgage rates stay high.

The chain reaction is pretty direct. Expensive energy pushes up consumer prices, consumer prices keep the bond market on edge, and mortgage rates stay elevated as a result. Housing ends up absorbing the damage through tighter affordability and softer demand.

Key inflation and energy data:

  • Annual inflation (March CPI): +3.3% (up from +2.4% in February)

  • Core inflation: 2.6% (up from 2.5%)

  • Monthly inflation: +0.9% headline, +0.2% core

  • Energy index: +10.9% month over month

  • Gasoline prices: +21.2% month over month

  • Average gas price: $4.12 per gallon (up from $3.54)

Energy accounted for nearly three-quarters of the total CPI increase last month, which underscores how concentrated the current inflation surge has been. With fuel costs rising at this pace, the broader economy is feeling the strain, and housing is absorbing the downstream effects through higher borrowing costs and reduced affordability.

Dr. Yun’s revised forecast is really a response to what’s happening upstream: 

  • Energy costs feeding inflation

  • Inflation keeping rates high

  • Rates keeping buyers on the sideline 

The 2026 housing market is being driven by forces that have nothing to do with housing.

What all this means is the most important numbers right now aren’t local. Rate movement and inflation data are what’s setting the pace of buyer activity. 

A faster recovery depends on energy markets calming down and inflation pulling back. Until that happens, rates stay elevated and demand stays soft. 

The opportunity is still there in 2026, just not as wide open as it looked in January.

 

Housing Market - April 28, 2026 - Sarah Lentz

 

https://nowbam.com/nar-revises-2026-forecast-as-rising-rates-inflation-slow-recovery/

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Location: Martinez, CA 94553, USA

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