Morgan Stanley's June 2026 report shows the U.S. housing market is undergoing a structural affordability reset, with no modeled mortgage-rate scenario returning conditions to pre-2022 levels. Under the firm's base case of rates moderating to 5%, monthly payments would fall from 24% to roughly 21% of household income, still above the 15% average seen after the 2007-2009 financial crisis. Even at 4%, affordability improves only modestly, while at 6%—which Morgan Stanley views as increasingly likely—gains barely materialize. The report notes that about 70% of existing homeowners hold mortgages below 5%, freezing housing turnover at a roughly 40-year low and keeping existing-home sales near 4 million annually, the weakest since 1995. First-time buyers face average mortgage balances of $334,000 in 2024, up from $240,000 in 2019, and average credit scores of 734, up from 718. J.P. Morgan and Bright MLS similarly forecast a reset rather than a rebound, with home price growth of about 2% in 2026 and 3% in 2027.
JPMorgan Chase & Co
Morgan Stanley