The Housing Market Is a Mess. So Why Aren’t Home Prices Falling?

No action: homes in Santa Clarita, Calif. (Mario Tama/Getty Images)

Key Points

Economists tell Barron’s that home prices are more likely to flatten out or rise slowly than to decline significantly.
Wharton’s Susan Wachter says homeowners are comfortable and flush with equity, meaning sales activity is taking a hit instead of prices.
Moody’s Analytics deputy chief economist Cristian deRitis foresees Case-Shiller index prices rising 0.9% in 2026 and 0.3% in 2027.

Around every economic corner, it seems, there’s a new glum mile-marker for the housing market. Home-builder sentiment last month, for instance, dropped to the lowest reading in 14 years. Pending home sales in September fell to the lowest on record. And both these big moves followed mortgage rates’ climb to the highest level in three years.

But don’t expect the same thing for home prices, economists tell Barron’s. Prices are more likely to flatten out, or keep rising slowly, than significantly decline.

“This is something different than I’ve seen in all the years starting after the financial crisis, which was an entirely different set of causes**,”** says Susan Wachter, a professor of real estate at the University of Pennsylvania’s Wharton School.

Mortgage rates’ recent gain**,** to as high as 7.4% according to Freddie Mac, was a shock to an already delicate housing market. “The recent data has really been awful,” says José Torres, a senior economist at Interactive Brokers .

Home price data, meanwhile, has kept on humming along. There’s no one measure of prices—and they all have their own methodologies, making comparison difficult—but most show that prices in recent months have remained at, or above, last year’s levels.

The gold standard measure of repeat home sale prices, the S&P Cotality Case-Shiller Index, posted a 2.1% annual gain in August, its most recent month. More recent, though less comprehensive, median home sale prices published by the National Association of Realtors show a rise in September to $417,500, a tidy 1.3% gain from one year prior.

Even the industry data showing slight declines aren’t flashing the kinds of home-price warning signs worth writing home about. The brokerage Redfin’s most recent data, for example, show the median sale price nationally in the four week period ended Oct. 25 was $389,601—technically down**,** if only 0.1% lower than the $390,000 median one year prior.

So, home buyers, don’t count on a plunge in prices, according to forecasts and commentary from the 17 economists and industry analysts who responded to Barron’s query about forecasts. The broad majority who shared recent expectations with Barron’s see price gains growing slowly or tapering off to flat in 2027.

Because homeowners are comfortable and flush with equity —unlike during the financial crisis of circa 2008—sales activity is taking a hit instead of prices, says Wharton’s Wachter, who expects buyers and sellers to largely stay on the sidelines while prices nominally rise.

Torres, the Interactive Brokers economist, recently lowered his expectations for home price growth to a 1.5% rise in 2026 and 1.8% in 2027, from 2.1% and 1.9% in an August forecast, respectively.

Home price growth is going to stay positive because sellers have no reason to accept buyers’ lower bids, he says. “The seller sees inflation in the overall economy, the seller sees a stock market that’s booming—so sellers aren’t in a position where they want to offer big discounts.”

Buyers, meanwhile, are in no hurry to lock down a home purchase when buying costs have climbed and price gains are losing steam. “The lack of expectations of price growth will mean that you can stay on the sidelines as a buyer,” Wachter says, noting that home prices are rising more slowly than overall inflation. “There’s no rush to buy—quite the contrary. Who wants to buy a depreciating asset, right?”

The result: instead of a seller accepting a lower home price, “they can just pull their listing from the market, wait it out, and see what happens in the future,” says Cristian deRitis, the deputy chief economist at Moody’s Analytics, who foresees prices measured by the Case-Shiller index rising 0.9% in 2026 and 0.3% in 2027. “They don’t have the pressure to sell.”

There are a few economic and political wild cards that could meaningfully shift the outlook. “There’s no forecasting model or business cycle model that captures someone’s interest in starting wars in the Middle East or interest in resolving them on a certain timeline,” says Jeff Tucker, the principal economist at real estate brokerage Windermere. If the war ends, he says, mortgage rates could move lower**.** That would draw more would-be buyers back to the housing market and, in turn, strengthen price gains.

Buyers eager for widespread declines, meanwhile, might only get them if the economy worsens, says Moody’s Analytics’ deRitis. Should unemployment rise and a recession hit, then borrowers—particularly those who bought with a mortgage in the past several years and have yet to accumulate much equity—could go underwater on their loans and default.

“Even in our worst-case scenario, we would see that as being a fairly shallow and short-lived type of decline,” deRitis says.

In other words, don’t hold your breath for either home price relief after the pandemic’s rapid rise in home prices or the long-awaited housing market revival in 2027: “It’s kind of status quo until something shifts,” says deRitis.

Write to Shaina Mishkin at shaina.mishkin@dowjones.com

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