WASHINGTON, D.C.—Housing has been on a rollercoaster ride in the last two years, and 2027 is shaping up to be more of the same. Even though real estate has certainly seen its down cycles, this time is different, a leading economist told real estate executives last Friday at RISMedia’s 38th Annual CEO & Leadership Exchange.
Bright MLS Chief Economist Lisa Sturtevant shared her economic insights during the session, painting a somewhat bleak future for U.S. housing. In her snapshot, a new normal has taken shape: Mortgage rates above 7%, fewer home sales, affordability pressures and an economy on shaky ground.
“We’ve been through cycles, and while that’s true, I think there are some structural changes in the economy, in the housing market, in the demographic makeup of the United States. That means that this cycle is stickier, and it’s…fundamentally different.”
The housing market at a glance
Real estate agents in many markets across the country already feel the slowdown in activity. Annual home sales are poised to sit at 4 million to 4.5 million units—notably lower than the longer-term average of 5.2 million, Sturtevant said.
According to Freddie Mac, the average 30-year fixed mortgage rate rose to 7.28% as of Oct. 1, the highest level in three years, Sturtevant noted. Mortgage rates pushed higher earlier this year, mostly buoyed by a ballooning federal debt of nearly $40 trillion, or 122% of GDP, Sturtevant explained. The federal debt previously accounted for 30% to 60% of GDP, she added.
“That means that our debt is larger than the entire magnitude of the economy and what the economy produces in a year,” Sturtevant said. “We’ll pay a trillion dollars in interest on the federal debt in 2026; this didn’t happen overnight.”
Mortgage rate movements often steal the spotlight, but worsening affordability, especially for the typical income earner, doesn’t get the attention it needs, Sturtevant noted.
Even if rates fall, the median monthly mortgage payment has nearly doubled for a typical home since 2020, representing a 90% increase, Sturtevant said. Meanwhile, incomes certainly haven’t doubled, rising just 24% over the same period.
Homing in on local data is key
While people will still buy and sell homes even at higher rates, those upward spikes immediately impact affordability, which is already a challenge. According to Bright MLS data, there are no major U.S. metros where the median household income can afford the median-priced home.
But as leaders in the room and agents know, all real estate is local. And that’s what real estate professionals need to put into context for buyers and sellers who hear about the doom and gloom of national housing news.
“Where you are matters,” Sturtevant said. “If you’re working with a homebuyer in Pittsburgh, they’re facing a very different environment than if you’re working with someone in Los Angeles. Having that local data is going to be more and more important…to understand the market and who is going to be in the market.”
Understanding local market data helps agents tell more effective stories that can help their clients make informed decisions. For instance, 30% of transactions in the U.S. were from all-cash deals. But the share of all-cash purchases are much higher in luxury markets, signaling a very specific buyer pool that’s less sensitive to interest rates, Sturtevant explained.
Sturtevant pointed to the University of Michigan’s Survey of Consumers, which found that consumer sentiment fell to a reading of 44.8 in May 2026—the lowest level in the survey’s 74-year history. Knowing your local market data inside and out can help you tell a compelling story to help ease this growing anxiety among buyers and sellers, Sturtevant added.
Demographic shifts are changing housing needs
Another overlooked piece of the housing puzzle is how demographics impact housing supply and demand, Sturtevant explained.
“If homeownership rates were the same now as they were in the year 2000, there would be 2.4 million more homeowners in America, and that’s actually probably understating it, because that doesn’t account for the fact that we’re actually forming households at lower rates,” Sturtevant said, noting there are about 700,000 net new household formations. Experts attribute this slowdown to an aging population, reduced immigration and rising mortality.
Then there’s the generational divide. Sturtevant noted that for the 72 million millennials in the U.S., many are still hitting peak first-time homebuying age, which has risen to 40—an all-time high, according to recent data from the National Association of Realtors®.
On the other end of the demographic spectrum, millennials are bumping up against 66 million baby boomers, many of whom want to age in place, Sturtevant said. That means those homes are withheld from the housing market, limiting supply in inventory-constrained areas, she added.
The other wrinkle is the expected $17 trillion wealth transfer from baby boomers to their adult children. However, Sturtevant acknowledged that while we know this major shift is coming, what we don’t know is if boomers’ children will keep those homes or sell them.
Still, there’s no denying the housing market is suffering from “a severe lack of velocity,” Sturtevant said. She noted that more than half of existing homeowners are carrying mortgage rates below 4%, further exacerbating the rate lock-in effect as rates push higher.
Using market data to stand out
The housing headlines grab attention and can spook buyers and sellers. But it’s up to experienced real estate agents and brokers to calm fears and contextualize the national picture against what’s happening in their backyards, Sturtevant said.
“If you’re thinking about (…) using data to differentiate yourself, I would really emphasize thinking about how to tell stories with housing market and economic data, how to segment it to the group of people you want to talk to,” she said.
While she expects housing demand and supply to be constrained by the structural economic changes going into 2027, Sturtevant is hopeful that this, too, shall pass.
But if you’re waiting for “things to go back to normal” or the return of 5% rates, it’s time to accept that those days are in the rearview mirror, she noted.
“As we think about how to use data to prepare ourselves for the long game, for this new normal, understanding your regional differences is going to be really important,” Sturtevant said.
