Q2 2026 Housing Outlook: The Stickiness of Shelter Inflation
Our updated 12-month forecast calls for national HPI growth of 2.8%, with material dispersion across sunbelt and coastal markets. Rate-lock unwind remains the dominant catalyst.
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Executive summary
Three takeaways drive our view this quarter. First, the national HPI forecast remains positive but narrow — we expect 2.8% growth over the next 12 months with a 1.6%–4.0% 80% interval. Second, market-level dispersion is widening: the top decile of MSAs is forecast to outgrow the bottom decile by more than 700 basis points. Third, the rate path is now the single largest driver of forecast variance, displacing inventory for the first time since 2023.
What changed since last quarter
Since our Q1 note, two inputs have moved materially. The BLS employment revision lowered 2025 payroll growth by 14%, which trimmed the demographic-driven component of our forecast. At the same time, FRED 30-year fixed mortgage rates compressed by approximately 35 basis points, partially offsetting that drag through improved affordability.
Markets to watch
Five sunbelt markets show forward risk scores in the bottom quartile, driven by inventory build-up and decelerating in-migration. Conversely, several mid-Atlantic and midwest metros continue to show underpriced fundamentals with positive forward signals.