U.S. housing market faces slower wealth-building gains over the next decade

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Dan Blystone

Yesterday

U.S. housing market faces slower wealth-building gains over the next decade — Slower housing wealth ahead

After years of rapid price increases, U.S. homeowners are likely to see home values rise at a much slower pace through the next decade. The shift suggests homeownership may still build wealth, but less quickly and with a longer holding period for buyers seeking meaningful equity gains.

Highlights

Moody’s Analytics projects U.S. national home-price growth averaging 2.1% annually from 2026 to 2035, down from about 5% over the past decade.
Higher home prices and 30-year fixed mortgage rates around 6%-7% are reducing the potential for substantial post-pandemic wealth gains, according to economists and Fannie Mae surveys.
A $500,000 home bought with 10% down at a 6.5% mortgage still yields about $234,000 in wealth over 10 years at 2.1% price growth, favoring long-term owners.

Forecasts point to weaker home-price growth

As reported by CNBC Make It, projections from Moody’s Analytics show national home-price growth averaging about 2.1% a year between 2026 and 2035. That is well below the roughly 5% annual appreciation many homeowners became used to over the past decade, based on S&P CoreLogic Case-Shiller data.

Federal Reserve data show the value of real estate held by U.S. households rose by more than 60% during the broader housing boom of the 2020s. But economists now say that affordability pressures, combined with much higher borrowing costs, are limiting the potential for a repeat of the pandemic-era surge.

Fannie Mae's survey of housing experts also points to modest gains, with average home-price growth of about 2.2% annually through 2028. Mark Zandi, chief economist at Moody’s Analytics, says buyers now face both higher home prices and mortgage rates that are far above the less-than-3% levels seen during the pandemic, with recent 30-year fixed rates around 6% to 7%.

Longer holding periods become more important

Slower appreciation does not mean homeownership stops generating wealth, but it changes the pace and the math. With higher mortgage rates, more of early monthly payments go toward interest, which can slow equity growth even as owners continue paying down principal.

Bankrate calculations cited in the report show that a buyer purchasing a $500,000 home with 10% down and a 6.5% mortgage could still build about $234,000 in housing wealth over 10 years, even with annual price growth of 2.1%. That benefit still comes alongside costs such as mortgage interest, property taxes, insurance and maintenance.

Housing analysts say the new environment favors buyers who can stay put for longer periods. Wendy Newman, a realtor in the San Francisco Bay area, says slower appreciation makes homeownership less forgiving for people who move after only a few years because transaction costs, taxes, insurance and upkeep take a larger share of any gains when price growth is modest.

In our earlier article on the House-amended 21st Century ROAD to Housing Act, we covered how lawmakers aim to ease construction constraints by updating manufactured-housing rules, streamlining parts of the HOME program, and boosting community banks’ capacity to fund mortgages and new homebuilding. The package was framed as an incremental step intended to lower building costs and expand supply nationwide, rather than a sweeping fix for every housing-market issue.

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