US home prices to rise 3.5% this year but tariffs will hinder new construction: Reuters poll
BENGALURU, June 3 (Reuters) – U.S. home prices will rise steadily over coming years on an expected further decline in mortgage rates, according to property experts in a Reuters survey who expressed a near-unanimous view President Donald Trump’s tariffs would hinder affordable home construction.
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“Looking ahead through the rest of this year and into 2026, we don’t expect mortgage rates to come down much — at least not through the third quarter of 2025 — so affordability will remain pressured,” said James Egan, housing strategist at Morgan Stanley.
If realised, that would be the slowest pace of home price rises since 2011. Average home prices are more than 50% above where they were in 2019, before the COVID-19 pandemic.
“The housing market remains in a cooler phase as sellers continue to adjust to looser conditions after the red-hot pandemic years,” said Thomas Ryan, an economist at Capital Economics.
They are forecast to fall to average 6.33% next year and 6.29% in 2027, survey medians showed, still over double some of the lowest rates of around 3% buyers took out during pandemic years that few are willing to relinquish.
“If mortgage rates were to drop meaningfully — say by 50 to 100 basis points — we could see a surge in buying activity. But rates really need to come down first,” said Lawrence Yun, chief economist at the National Association of Realtors.
TARIFFS TO LIMIT CONSTRUCTION OF AFFORDABLE HOMES
“While there’s still a lot of uncertainty about what level of tariffs are ultimately going to be implemented, they’re going to make it more expensive to build. You’ll see either fewer homes built, smaller homes built, or a combination of both,” said Morgan Stanley’s Egan.
Asked how U.S. tariffs on major trading partners announced earlier this year would affect affordable home construction, a near-90% majority, 21 of 24, said fewer homes would be built, including two who said far fewer. Three said there would be no impact.
“President Trump’s inflationary trade and immigration policies leave no clear path to the lower borrowing costs the housing market desperately needs,” said Capital Economics’ Ryan, who expects no more Fed rate cuts this year and mortgage rates near 7%.
Only half of respondents, 12 of 24, said purchasing affordability for first-time homebuyers would improve over the coming year, down from 62% in a February poll.
(Other stories from the Q2 global Reuters housing poll)
Reporting by Sarupya Ganguly; Analysis by Jaiganesh Mahesh; Polling by Shaloo Shrivastava, Debrah Gomes and Reshma Ann Samuel; Editing by Ross Finley and Kim Coghill
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