Analysts at UBS, including John Lovallo, have turned significantly bullish on the housing market’s revival. They are hopeful for major progress to materialize by 2026. This optimistic view comes from a little bit of everything economically, showing an expected rebound in housing demand and pricing.
Lovallo pointed out that the recent stabilization of interest rates is a key element in creating this optimism. With mortgage rates starting to stabilize, more would-be homebuyers can start to feel reassured about getting into their new homes. Implicit in this move is the expectation that lower borrowing costs will improve affordability, allowing more people to realize their dream of homeownership.
Lovallo cited the continuing labor market recovery as the other key ingredient. As employment rates improve, consumer confidence usually increases. That renewed confidence impacts behavior and spending all the way up the chain, including on major, long-lasting investments like homes. Looking forward, analysts forecast that there is light ahead for job security. A large number of people who had delayed home purchases will quickly flock back to the market.
Plus, the permanent move to remote work has changed where most Americans want to live. More importantly, demand has shifted dramatically towards suburban markets. Particularly those that offer larger home models and access to a range of amenities. This trend has accelerated new development in these areas, which would further feed the demand for new housing and jumpstart the residential market. Lovallo noted that if builders can meet this rising demand, it may bolster overall housing inventory and contribute to a healthier market.
Challenges continue, like high construction costs and lack of inventory in core cities. The happy mood is starting to get downright giddy. Lovallo emphasized that the combination of favorable interest rates, a recovering labor market, and shifts in buyer preferences sets a promising stage for housing recovery.