US housing and mortgage markets Report Interpretation

Overview

This Housing and Mortgage Monitor examines unusually weak but still positive US home-price growth, the regional supply-driven divergence beneath the national figures, and supporting housing, mortgage-backed securities and commercial-mortgage indicators. Goldman Sachs expects affordability constraints to keep near-term home-price appreciation subdued.

Core views

Goldman Sachs describes the current period as an unusually long stretch of weak US home-price appreciation. The S&P Cotality Case-Shiller National Home Price Index showed prices up 1.1% year over year in May 2026, while annual appreciation had remained in a narrow 0–2% range for the prior 12 months. The report calls this the longest comparable period since a 20-month stretch ending in August 1993; sustained sub-2% growth was otherwise mainly seen in the 1950s and 1960s. It attributes the persistence of weak growth primarily to strained affordability: high home prices and mortgage rates well above pre-2022 levels have kept affordability historically tight for roughly four years, while concern about an uncertain labor market has weakened consumer confidence. With both home prices and mortgage rates expected to remain elevated relative to recent history, Goldman Sachs sees limited scope for a meaningful near-term affordability improvement and therefore continued weak home-price appreciation. National data mask significant metro-level weakness. In June, 45% of the top 50 metro areas had negative year-over-year home-price appreciation, modestly below a recent 51% peak in March, even as national appreciation remained marginally positive. The report notes that a positive national reading alongside price declines in nearly half of large metros is unusual, because divergences historically tended to occur as national appreciation accelerated or decelerated through zero. Regional outcomes were sharply different: New York and Chicago recorded 4.23% and 6.93% year-over-year appreciation, and Detroit and Cleveland gained roughly 3%, while Tampa, Las Vegas, Denver and Seattle each declined by around 2%. Goldman Sachs identifies inventory dynamics as the principal explanation for this geographic dispersion. Across roughly 20 of the largest metro areas, cumulative inventory growth since the pandemic has a strong, statistically significant negative relationship with recent home-price appreciation and explains 73% of the variation. Supply has risen particularly in the South and parts of the West because of elevated new construction. The report also points to a gradual easing of mortgage lock-in as households accept mortgage rates above 6% as the new normal, and to rising homeowners' insurance costs in some coastal and climate-exposed markets, which may bring vacation homes, second homes and investment properties to market. These forces help explain why the South and West have seen more price declines while the Northeast and Midwest have remained stronger. The institution argues that dispersion itself is a normal feature of the US housing market rather than a structural anomaly. Current metro-level dispersion is broadly comparable with 2015–19, another period of relatively stable national appreciation, though national growth was higher then. Using the gap between the 80th and 20th percentiles of home-price appreciation, long-run data from the Philadelphia Fed's Historical Housing Prices Project show average dispersion of about 11% across 30 metros over 116 years since 1890. More granular Zillow data since 2000 show average dispersion of 8%, versus about 5% recently. Thus, the report frames the unusual feature as the low level of national appreciation, not the existence of regional variation. The monitor's supporting indicators reinforce a constrained housing backdrop. Rental affordability remains superior to mortgage affordability, the Goldman Sachs housing-affordability index remains low, existing-home sales decreased in June and homebuyer sentiment is near historical lows. At the same time, some fundamentals remain resilient: the foreclosure rate is only 0.64%, 2.2% of mortgaged properties have negative equity, and household debt-to-income and debt-service ratios declined in 2026Q1. Credit and consumer indicators are mixed, however: 33% of new GSE purchase mortgages have debt-to-income ratios above 43%, HELOC debt increased 11% year over year through 2026Q1, and serious-delinquency rates increased in Q1. For mortgage markets, Goldman Sachs forecasts total 1–4 family mortgage originations of $2.156 trillion in 2026, around $2.2 trillion, rising to $2.215 trillion in 2027. Its table shows 2026 purchase originations of $1.445 trillion, refinance originations of $711 billion and a 33% refinance share; the period-end 30-year fixed mortgage-rate forecast is 6.45% for 2026 and 6.30% for 2027. Refinancing remains constrained because about 85% of outstanding mortgages carry interest rates below PMMS and only about 4% of borrowers have at least a 50bp refinancing incentive. Agency MBS conditions have improved recently. The current-coupon mortgage basis tightened to 124bp during the month and stood at the 46th percentile of its 1997–2023 range, where a lower percentile is richer and a higher percentile is cheaper. Agency MBS delivered a 3.4% 12-month total return versus 2.0% for investment-grade corporate bonds, although 15-year agency MBS had negative year-to-date excess returns. Agency issuance increased in June; 30-year conventional and government prepayment speeds increased, with 30-year FNMA prepayment rates up 2% in June versus May, while higher-coupon conventional and high-coupon Ginnie Mae cohorts saw month-on-month prepayment declines. Commercial real-estate credit remains challenged by refinancing and property fundamentals. CMBS delinquencies are described as contained despite difficult CRE conditions, but large CMBS maturities are arriving in 2026. Recent conduit CMBS originations have an average note rate of 6.2%, compared with 4.3% for loans maturing in 2026, creating a higher-rate refinancing obstacle. Office and retail property prices are down year to date, CBD office prices have fallen to post-global-financial-crisis levels, and office cap rates have widened over the past six months. In contrast, AAA CMBS spreads have tightened; the report also notes that office represented only 14% of 2025 conduit CMBS collateral, the lowest share in more than a decade.

Analysis framework

Goldman Sachs first compares current national home-price appreciation with long historical periods, then decomposes the national result across major metros and relates price performance to inventory growth. It complements this supply-and-demand analysis with affordability, sales, credit, household-balance-sheet, mortgage-origination, prepayment, MBS valuation and CMBS refinancing indicators.

Methodology notes

• Industry AnalysisSupply-demand framework

  Metro home-price appreciation is compared with cumulative inventory growth and new-construction supply.

  The report uses supply availability as the key mechanism: metros with greater inventory increases have generally experienced weaker recent price appreciation, with inventory growth explaining 73% of the variation across roughly 20 large metros.

• Industry AnalysisVolume-price decomposition

  Housing conditions are assessed through home-price appreciation, sales volume, inventory and construction indicators.

  This separates price performance from market activity and available supply, allowing the report to explain why weak national price growth coexists with very different local outcomes.

• Fixed Income and CreditSpread analysis

  Agency MBS valuation is assessed through the current-coupon mortgage basis and historical valuation percentiles.

  The mortgage basis measures the spread between the current-coupon mortgage rate and the 5/10-year Treasury rate; the report uses its 1997–2023 percentile to place current MBS valuations in historical context.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Agency MBS

  The report notes improved recent valuations and stronger trailing total returns relative to investment-grade corporate bonds.

  Strengths

  Returned 3.4% over the past 12 months versus 2.0% for investment-grade corporate bonds; current-coupon mortgage basis tightened to 124bp.

  Weaknesses

  15-year agency MBS delivered negative year-to-date excess returns.

  Comparison

  12-month total return exceeded investment-grade corporate bonds by 1.4 percentage points.

  Risks

  Prepayment behavior varies by coupon and vintage; interest-rate volatility shifted up over the last year.

• Conduit CMBS

  Commercial mortgage credit is linked to challenging CRE fundamentals and a higher-rate refinancing burden.

  Strengths

  AAA CMBS spreads have tightened; office collateral represented only 14% of 2025 conduit CMBS issuance.

  Weaknesses

  Large maturities are due in 2026 and property fundamentals remain challenging.

  Comparison

  Recent originations carry a 6.2% average note rate versus 4.3% for loans maturing in 2026.

  Risks

  Higher note rates may obstruct refinancing, particularly amid weaker office and retail property prices.

Key data

• US home-price appreciation1.1% year over yearS&P Cotality Case-Shiller National Home Price Index, May 2026.
• Duration of low HPA12 months within a 0–2% rangeThe longest comparable stretch since a 20-month period ending in August 1993.
• Top-50 metros with negative HPA45%June 2026; down from a recent 51% peak in March.
• Inventory-growth explanatory power73%Share of variation in recent HPA explained across roughly 20 largest metro areas.
• 2026 total mortgage originations forecast$2.156 trillionApproximately $2.2 trillion of total 1–4 family originations.
• 2026 30-year fixed mortgage rate forecast6.45%Period-end forecast; 2027 forecast is 6.30%.
• Borrowers with refinancing incentive4%Outstanding 30-year conventional mortgages with at least a 50bp refinance incentive.
• Agency MBS 12-month total return+3.4%Versus +2.0% for investment-grade corporate bonds.
• CMBS refinancing rate gap6.2% versus 4.3%Average note rate on recent conduit CMBS originations versus loans maturing in 2026.

Impact & implications

The report's central implication is that subdued national home-price growth is likely to persist while affordability remains poor, but local outcomes should continue to diverge according to supply and inventory conditions. For mortgage and credit markets, limited refinancing incentives constrain refinance activity, while CMBS faces a material refinancing-rate mismatch despite contained delinquencies and tighter AAA spreads.