Morning Quarterback

For years, the housing market conversation has centered on what’s missing: not enough inventory, not enough sellers, not enough transactions.

But as economists dig through the data heading into 2026, something important is emerging—demand never disappeared. It simply went quiet.

What looked like stagnation may actually be patience.

The Demand Hiding in Plain Sight

One of the clearest clues comes from listing withdrawals—homes that were listed, then pulled off the market without selling.

In 2025, nearly 45% of new listings were withdrawn, the highest share in recent history. At first glance, this appears to be “shadow inventory,” often interpreted as sellers unable to find buyers.

But a closer look changes the story.

Most withdrawn listings don’t resemble investors exiting rental portfolios. Instead, they appear to be owner-occupants—families who need to sell their current home in order to buy the next one.

That distinction matters.

For owner-occupiers, every withdrawn listing represents two delayed transactions:

One sale
One purchase

Both likely pushed from 2025 into 2026.

This isn’t shadow inventory.

It’s shadow demand.

Mortgage Applications Tell the Same Story

The mortgage data reinforces this interpretation. Throughout 2025, purchase mortgage applications ran 15–25% higher year over year, while actual closed sales increased only 2–4%.

That gap is meaningful.

Applying for a mortgage isn’t casual behavior. These are buyers who:

Gathered documentation
Ran affordability scenarios
Secured pre-approvals

And then paused.

Maybe rates moved at the wrong time.

Maybe inventory didn’t cooperate.

Maybe affordability stayed just out of reach.

But the key takeaway is this:

They didn’t vanish.

They’re still watching.

What Will Unlock Waiting Buyers?

Mortgage rates matter—but they aren’t the whole story.

Since 2022, rates have approached 6% three times:

Early 2023
September 2024
September 2025

Each time, buyer activity picked up.

The pattern appears consistent:

Around 6.5%, buyers hesitate

Near 6%, demand re-engages

Government forecasts currently call for average mortgage rates near 6.4% in 2026, with potential dips into the high-5% range if labor conditions soften.

But there’s another catalyst that may matter just as much.

Watch Hiring, Not Just Rates

The hiring rate has fallen to roughly 3.2%, a level that looks recessionary—even though unemployment remains relatively low.

Why the disconnect?

Workers are “job hugging.”

They aren’t leaving positions because new opportunities feel scarce.

And when people don’t change jobs, they don’t change homes.

An improvement in hiring—even alongside slightly higher unemployment from more workforce participation—could be a powerful trigger. When confidence returns, people accept relocations, pursue lifestyle changes, and generate housing transactions.

The ideal setup for 2026 may actually be:

Improving hiring
Moderating rates
Stabilizing inflation

That combination could unlock demand that’s been quietly building.

What This Means for 2026

The housing market doesn’t appear frozen because buyers are gone. It appears frozen because buyers are waiting.

Evidence of that demand shows up in:

Listing withdrawals
Mortgage applications
Delayed seller-buyer chains

More than 150,000 additional transactions appear to have been postponed from 2025 into 2026.

Most forecasts currently call for ~5% home sales growth in 2026.

But if rates cooperate and confidence returns, the data suggests something stronger may be possible—8–10% transaction growth, which would represent the strongest post-pandemic rebound yet.

Fingers crossed.

2026 Housing Market Outlook

Insights from John Burns’ 2026 Housing Market Conference

Held November 4 in New York, John Burns Research gathered 260 housing industry executives for a deep dive into the year ahead. Below are key themes shaping investor strategy:

1. Shift the Target Customer

Strong growth among ages 40–55 and 70+ signals a pivot away from heavy reliance on first-time buyers and active adult segments. Household formation is happening later, creating pent-up rental demand and continued migration from high-cost to lower-cost markets.

2. Expect Rate Divergence

Short-term rates may fall in a weaker economy, but long-term rates—including mortgages—could stay elevated due to structural inflation pressures. Rate buydowns have become a powerful (and costly) demand tool.

3. Building Costs Stay Contained

Unused manufacturing capacity and competitive pressure are limiting cost increases. Entry-level demand remains soft, while luxury and custom homes are outperforming.

4. No Quick Fix for Rentals

High supply and soft demand weigh on rental valuations. Many owners are holding properties longer, while new development faces feasibility challenges.

5. Capital Is Available—Selectively

The best risk-adjusted returns are emerging in land entitlement and development. Strong balance sheets are enabling acquisition opportunities domestically and abroad.

6. Winners Control Their Land and Balance Sheets

Builders succeeding today maintain operational control, self-finance strategically, and tailor products to evolving demographics.

Sales, Prices, and Rent Policy: The Reality Ahead

Existing home sales are expected to rise modestly in 2026 but remain historically low due to affordability and rate lock-in.

Nearly 80% of mortgage holders still carry rates below 6%, limiting turnover unless life events intervene.

Home prices are projected to rise modestly (~2.2%), but inflation is expected to outpace those gains—meaning real prices decline slightly, improving affordability over time.

Rent Control Update (Los Angeles)

A new rent control law taking effect mid-January 2026 reduces allowable rent increases and expands tenant protections. Importantly, housing providers may still act under the current framework before implementation, creating a narrow, time-sensitive window.