The housing market has been a bit lackluster in the first half of 2026.High mortgage rates and home prices have kept homebuyer demand down. As a result, sellers are hesitant to list their homes for fear of them staying on the market too long or being forced to sell at a lower price.This puts buyers and real estate investors in a tough spot. When there aren’t enough homes on the market, finding one you like at a reasonable price is difficult — especially with mortgage rates in the mid-6% range.Will the second half of 2026 be any different?TheStreet gained access to Goldman Sachs’ Mid-Year Housing Outlook. In this analysis, the company reviews the first half of the year and uses the data to predict what will happen during the rest of the year.The analysis uses a phrase that perfectly encapsulates the details: “stabilizing but subdued.”Mortgage rates will hurt inventoryMortgage rates have been hovering at around 6.5% for weeks, according to Freddie Mac data. Many people expected rates to fall more substantially in 2026, but they rose after the U.S. and Israel attacked Iran in late February.There has since been progress in the Middle East, but since the state of the way is still uncertain, there’s no guarantee that mortgage rates will decrease. Other economic factors could keep rates relatively high in the second half of the year, too.For example, the Federal Reserve is unlikely to cut the federal funds rate in 2026. In fact, a rate hike is probably in the cards. The CME FedWatch tool doesn’t foresee a hike at the FOMC July meeting, but the likelihood increases for the September meeting.Goldman Sachs predicts that rates in the mid-6% range could be bad news for real estate investors.Want to buy a house to use as an investment property? It could be difficult to find a home, especially one that’s a good fit for your investment goals.Related: Americans face major decision with mortgage rate newsNearly 80% of homeowners with home loans have mortgage rates that are lower than current market rates, according to Goldman Sachs. Almost 60% of borrowers have mortgage rates that are at least 2 percentage points lower than market rates.As a result, a lot of people want to stay in their homes rather than sell and take on a higher interest rate.Goldman Sachs predicts annualized existing home sales of 4.2 million in the second half of 2026. This pace represents a 3% improvement from the first half of the year — but a 22% slowdown from 2019.
Goldman Sachs predicts that homeowners will be hesitant to sell in the second half of 2026.MoMo Productions / Getty Images
Goldman Sachs expects lukewarm housing demandRelatively high mortgage rates not only keep homeowners in their houses, but they can dissuade potential homebuyers from entering the market. This has been the case for much of 2026, but buyer sentiment has started to shift a little.”On the positive side, domestic demographic trends remain supportive, and survey-based measures of purchase intentions have improved,” Goldman Sachs writes.However, poor income growth is still a hindrance to housing demand. Year-over-year wage growth has stayed at 3.7% or lower throughout 2026, according to the U.S. Bureau of Labor Statistics, a decline from 2025’s wage growth.More Housing Market:Zillow sees change in housing market, home valuesNew home-selling strategy poses threat to buyersAmericans face dilemma after housing market newsImmigration rates are also down. This hurts real estate investors because immigrants who would have wanted to rent from them are not in the U.S. It also hurts the housing market overall because there are now fewer immigrants to buy homes.This combination of good and bad leaves Goldman Sachs analysts predicting “tepid” housing demand in Q3 and Q4.Low demand typically leads to slower home price growth. Goldman Sachs projects that December-over-December national home prices will inch up by 0.8% this year, then by 2.3% next year.My takeaways from the Goldman Sachs housing analysisI do expect mortgage rates to remain relatively high for the rest of 2026, especially if the Fed enforces more than one federal funds rate hike. And I agree with Goldman Sachs that relatively high rates will continue to hurt homebuying demand.But I’m hesitant to agree that homeowners with lower mortgage rates will continue to be such a problem for inventory. Not to say it won’t have any impact at all. But the trend of homeowners refusing to sell because they have such low mortgage rates — known as the “rate lock-in effect” — has started to dwindle, according to a spring survey by Coldwell Banker Real Estate. Real estate agents in the survey said that the lock-in effect is still a minor factor for their clients deciding whether to sell their homes, but 39% claimed it isn’t a major factor. In fact, one in three sellers is giving up a rate under 5% to move.Hopefully, this trend will open up more housing inventory in parts of the U.S.Goldman Sachs’ analysis also predicts a slowdown of single- and multi-family home starts. This projection doesn’t surprise me, but it is disappointing. The lack of supply is the main reason behind the national housing affordability crisis. When there isn’t enough supply to meet demand, competition heats up between buyers. And more competition results in higher home prices, regardless of whether it’s for a family buying a house or a real estate investor.Zillow research found that the U.S. needs 4.7 million homes to address the existing housing shortage problem. And that’s not even counting the number we would need to keep up with future demand.So, if housing starts are slowing down — that’s bad news for home prices. And it affects nearly every type of potential homebuyer.Related: Redfin sees shift in housing market, home prices