Top economists have doubled their inflation forecasts for the second quarter of 2026. Here’s what this means for buyers, sellers, and real estate agents.
Some of the country’s top economists have doubled their inflation forecasts.
Consumer price inflation is expected to reach 6% in the second quarter of 2026, according to a survey of professional forecasters released Friday by the Philadelphia Fed.
That’s up from an estimate of 2.7% in the previous survey, before U.S. and Israeli military action against Iran sent energy prices soaring and upended overall price forecasts.
How we got here
The latest consumer price index (CPI) report for April was already hinting at trouble, with headline inflation at an annual rate of 3.8%, the highest level in nearly three years.
Energy prices rose 3.8% in the month, accounting for more than 40% of the overall increase. Food prices rose 0.5%, but housing costs, which had shown some signs of easing, rose 0.6%. The producer price index tells a similar story. Annual wholesale inflation reached 6% in April.
Then the professional forecaster’s survey arrived on Friday morning, raising the stakes even further. For the full year, the committee forecasts the composite CPI to be 3.5% and the core CPI to be 2.9%, an upward revision from the previous survey’s estimates of 2.6% for both indicators.
Are interest rates increasing?
For the residential real estate market, the impact is direct. Expectations that the Fed will need to keep interest rates steady have kept mortgage rates high through 2025 and 2026. This calculation now looks conservative.
The Fed cut interest rates three times in 2025, but paused in the last three meetings chaired by Chairman Jerome Powell. April’s CPI report led traders to raise the probability of a rate hike by year-end to about 30-40%, according to CME Group data, as inflation accelerates.
Kevin Warsh, who was confirmed by the Senate this week as the new Federal Reserve chairman, is seen by some housing experts as more dovish on interest rates and may support lowering rates to stimulate the economy. Inflation data makes it difficult to act on that preference. His policymakers have signaled they would be more likely to raise interest rates and leave them on hold if conditions worsen.
“Given that inflation is going in the wrong direction and the labor market is holding up, it’s very unlikely that the Fed will be able to cut rates anytime soon and could start pricing in rate hikes next year,” Chris Zaccarelli, chief investment officer at Northlight Asset Management, told CNBC.
What does it mean for real estate agents?
High inflation and high interest rates are a cruel combination for the homebuyers that real estate agents are trying to help. Monthly payments, already a key factor in purchasing decisions, are being squeezed on both sides by rising mortgage rates that won’t be lowered until the Fed has confidence in inflation and rising food, energy and home prices.
The lock-in effect that suppresses listed inventories may not ease in a high interest rate environment. Sellers sitting on low mortgage rates have less incentive to list if the rate environment doesn’t improve, and more reason to wait if they believe relief will eventually come.
What the second half of 2026 looks like for the housing market could depend almost entirely on whether the Iran conflict subsides, energy prices stabilize and the new Fed chair finds room to maneuver. At the moment, professional forecasters are not betting on it.
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