Housing Market Update 2026: Rates Rise, Inventory Tightens | Mike Simonsen

In this episode of The Real Wealth Show, host Kathy Fetke welcomes back Mike Simonsen, Chief Economist at Compass International Holdings, to break down the current state of the U.S. housing market in 2026. Simonsen highlights that while home prices remain largely flat year-over-year, transaction volume has dropped 30% from pandemic highs, signaling a sales crash rather than a price crash. He attributes recent mortgage rate increases—from 5.99% to 6.5%—to inflation fears stemming from global instability, particularly the war in the Middle East, which has shifted investor sentiment away from a 'flight to safety' and toward risk aversion. This has dampened affordability and made rate timing a 'fool’s game.' For landlords, Simonsen warns that both rent growth and home price appreciation are slowing due to weakened household formation, which is tied to economic cycles and immigration. He emphasizes that pro formas must now rely on conservative assumptions, with cash flow being paramount over speculative appreciation. Despite tight inventory nationwide—especially in the Midwest and Northeast—Simonsen notes that properly priced, well-maintained homes are still selling quickly, and inventory shortages could intensify in 18–24 months as construction slows. He concludes with a call to action: be patient, well-financed, and focused on cash-flowing deals in today’s uncertain market. Key takeaways include: (1) Avoid over-relying on rent or price appreciation in underwriting—assume 1–2% annual growth at most; (2) Inventory remains critically low, especially in the Northeast and Midwest, due to reduced migration and reluctance to sell; (3) Mortgage rates are volatile and not likely to fall soon, so timing the market is risky; (4) Use real-time data like price reductions and comps to price homes accurately; (5) The best opportunities exist for investors who can act patiently and focus on cash flow today. The overall tone is cautiously optimistic, emphasizing strategic patience and disciplined underwriting over speculation.