Inflation is rising again. This is what it means for the housing market
Top economists just doubled their inflation forecast for the second quarter of 2026. Here’s what this means for buyers, sellers and real estate agents.
Some of the country’s top economists just doubled their inflation forecasts.
Consumer price inflation is expected to reach 6 percent in the second quarter of 2026. This is evident from the Survey of Professional Forecasters published Friday by the Federal Reserve Bank of Philadelphia.
That’s up from an estimate of 2.7 percent in the previous survey, before U.S. and Israeli military action against Iran sent energy prices soaring and upended price forecasts across the board.
How we got here
The most recent CPI report from April had already identified problems: overall inflation was 3.8 percent per yearthe highest value in almost three years.
Energy prices rose by 3.8 percent in one month, accounting for more than 40 percent of total profits. Food prices rose 0.5 percent, while shelter costs, which showed some signs of easing, rose again 0.6 percent. The producer price index told a similar story. Annual wholesale inflation was 6 percent in April.
Then the Survey of Professional Forecasters arrived Friday morning, further raising the stakes. For the full year, the panel now expects a headline CPI of 3.5 percent and a core CPI of 2.9 percent, compared to estimates of 2.6 percent for both measures in the previous survey.
Are interest rate increases coming?
The consequences for the housing market are direct. Mortgage rates have remained high in 2025 and 2026, on expectations that the Fed should keep rates stable. That calculation now seems conservative.
The Fed cut rates three times in 2025 and then paused at the last three meetings led by Jerome Powell. With inflation accelerating, traders raised the odds of a rate hike by the end of the year to around 30 to 40 percent, following April’s CPI report. according to data from the CME Group.
Kevin Warsh, appointed by the Senate this week as the new chairman of the Federal Reserve, is seen by some housing experts as more accommodative on interest rates, meaning he could favor lowering them to stimulate the economy. The inflation data makes it more difficult to respond to this preference. His fellow policymakers have signaled a pause with a tendency to hike rates as conditions worsen.
“Given that inflation is heading in the wrong direction and the labor market is holding up, it is highly unlikely that the Fed will be able to cut rates anytime soon, and we may start pricing in rate hikes for next year,” said Chris Zaccarelli, chief investment officer at Northlight Asset Management. told CNBC.
What it means for real estate agents
High inflation and high rates are a brutal combination for the homebuyers agents are trying to help. Monthly payments, already the dominant factor in purchasing decisions, are being pressured from both sides by higher mortgage rates, which will only fall as the Fed gains confidence in inflation and rising food, energy and housing prices.
The lock-in effect, which has suppressed listing inventory, may also not diminish in a high-fee environment. Sellers with low mortgage rates have less reason to take out a mortgage if the interest rate environment doesn’t improve and more reason to wait if they think relief will eventually come.
What the second half of 2026 will look like for the housing market will depend almost entirely on whether the conflict in Iran subsides, energy prices stabilize and whether the new Fed chairman finds room to take action. Right now, the professional forecasters aren’t betting on it.
Email Nick Pipitone
