Looking ahead, home prices are still expected to rise, just not as dramatically as before. Forecasts point to a 3 percent increase in 2026, followed by a slightly bigger jump of 4 percent in 2027. The reasoning is straightforward: with fewer buyers in the market and borrowing costs higher, there's simply less pressure pushing prices upward.



Borrowers Feel the Squeeze
Since early 2025, mortgage rates have been on a steady climb, which means buyers can no longer borrow as much as they used to. This has hit first-time buyers particularly hard, since many were already stretching their budgets to the limit. With less room to maneuver, they're finding it much tougher to absorb rising prices when their mortgage capacity has shrunk.



Wage growth is expected to continue over the next two years, but it won't be enough to make up for the higher cost of borrowing. Add in a dose of economic uncertainty, and people are understandably more hesitant to dip into their savings for something as big as a house. Households, in short, are playing it safe when it comes to major spending decisions.



A Closer Look at the Numbers
Mortgage applications overall fell by 3 percent year-on-year in the second quarter, with the steepest drops coming from renovations, refinancing, and sustainability-related loans. Applications specifically for buying a home held steady, but that stability came from an unexpe.