In this excerpt from our full November cover story, Rick Sharga, Founder and CEO of CJ Patrick Company, offers a sweeping analysis of where the housing market stands as 2026 approaches. From his view of a five-year “reset” to the latest signals on delinquencies, investor activity, demographic pressure, and policy risks, Sharga breaks down the economic forces and industry blind spots that will shape the year ahead.
How would you characterize the housing market heading into 2026: correction, stabilization, or early recovery?
I believe that we’re in the third year of a five-year “reset” period, as the market slowly adjusts to higher prices and higher mortgage rates. We’ve never before had a period where home prices rose by over 40%, followed by mortgage interest rates doubling, and that one-two punch decimated affordability, especially for first-time buyers. Existing home sales fell from over six million in 2021 to five million in 2022, four million in 2023 and 2024, and are on pace to finish the year at about the same number this year. Inventory levels are rising, days on market increasing, and home price appreciation slowing down—and reversing course, in some markets—as wages grow. We can probably expect another year of lackluster sales and price growth in 2026, but the market should begin to recover as we move closer to 2027.
With affordability still strained and inventory tight, do you see transaction volumes improving next year or remaining near historic lows?
I think 2026 sales volume will be modestly better than 2025, but not much more than that. Barring anything extraordinary happening in the economy—either positive or negative—we’ll likely have at least one more year where existing home sales will be challenged to go much higher than four million units, and where home price appreciation will continue to slow down in most markets, and go negative in some parts of the country. Inventory will continue to increase, though, at least partly due to the pace of sales slowing down, and some older homeowners deciding it’s time to downsize.
What do the latest foreclosure and delinquency trends suggest about borrower health going into 2026?
Mortgage delinquency rates continue to stay below historical averages and are close to the lowest they’ve ever been. There’s a combination of factors at play here: the unemployment rate is still very low (and there’s a strong correlation between unemployment rates and mortgage delinquency rates); borrower credit quality has been excellent; millions of homeowners refinanced into lower interest rate loans, and so may be paying less every month today than when they first bought their house; and there’s a massive amount of homeowner equity—well over $34 trillion—that distressed homeowners can tap into if they need it. Mortgage servicers have also been extraordinarily helpful to borrowers who find themselves in temporary financial distress, which has kept delinquencies from rolling into foreclosure. And overall foreclosure activity, which was up about 17% from a year ago, according to ATTOM’s Q3 2025 Foreclosure Report, is still running about 30% below 2019 levels, which weren’t all that high in the first place.
That said, there are some red flags. Consumer debt is at an all-time high of $18.4 trillion according to the NY Fed, and delinquencies on that debt have risen for nine of the past 10 quarters. Serious delinquency rates (90+ days past due) on credit cards, auto loans, and student loans are all now higher than they were prior to COVID. Rapidly rising homeowners’ insurance premiums and property taxes are making it difficult for some homeowners to stay current on their monthly payments. While mortgage delinquencies remain low, serious delinquency rates on mortgage loans have risen for four consecutive quarters, suggesting that borrowers who do become delinquent are having a harder time getting back on track. The FHA, whose loan portfolio accounts for over 50% of seriously delinquent mortgages, has tightened up its loss mitigation protocols, and we can expect a higher percentage of those past-due loans to become foreclosures in the months ahead. Context here is important: FHA loans only account for about 15% of all mortgages, and only about 4% of those are seriously delinquent. So, we’ll see more foreclosure activity, but not in a huge way by any means.
Which macroeconomic indicators are you watching most closely right now as signals for housing direction?
Jobs, jobs, and jobs. We have a very unusual labor market today: no one is hiring, and no one is firing (although we’ve seen more layoffs announced recently). A strong jobs market is the No. 1 predictor of a strong housing market. More job creation generally means higher wages and more housing demand. A weaker job market, with higher unemployment, generally means more delinquencies and foreclosures, and fewer home sales.
There’s also demographics to consider. In 2024, almost five million young adults turned 35 in America, and we’ll likely see similar results when 2025 numbers are compiled. Normally, these young adults would be looking to buy homes, but they have opted to rent instead due to poor affordability. Most of the research suggests that the majority of these young adults still want to become homeowners and are just waiting for market conditions to improve. That should provide at least a bit of a tailwind for the housing market in the next few years.
How active do you expect institutional and individual investors to be in the single-family rental and distressed property space next year?
Investors own 20% of the single-family homes in the country and accounted for 33% of all home purchases in the second quarter of 2025, so it’s almost a certainty that they’ll continue to play a large role in the housing market—especially the single-family rental market. But there’s a huge misperception about who these investors are: 91% of the investor-owned homes are held by mom-and-pop investors who hold 10 or fewer properties. The largest institutional investors—those who own over 1,000 units—account for less than 2% of investor-owned homes. And this cohort of large investors have been net sellers of homes for the last six consecutive quarters. This doesn’t mean that they’re getting out of the single-family rental space, though; a lot of the larger players are redeploying their capital into build-to-rent communities. This means that they’re no longer competing with small investors or traditional homebuyers for existing homes, and it means that they’re actually adding much-needed rental inventory to the market. I think you’ll continue to see all those trends—small investors buying and holding more properties, and larger investors selling existing homes and building new rental communities—through 2026.
What data signals or leading indicators are most useful today for spotting early shifts in market momentum?
Pending home sales from the NAR and purchase loan applications from the MBA are usually very useful tools in terms of predicting near-term shifts in market momentum. Today’s market is incredibly rate-sensitive, so following rising or falling mortgage rates can be an early indicator as well, and to anticipate the direction of those changing rates, it helps to follow yields on U.S. 10-year Treasury bonds. Contract cancellations and withdrawn listings are both running higher than usual right now, suggesting some market weakness; watching those numbers might provide insights into further weakening or improvement.
More broadly, there are demographic trends like population migration, job growth, and wage growth that can factor into regional or local market momentum—markets with population growth, job growth, and wage growth tend to have relatively strong housing markets, both for owner-occupants and for rental property owners.
From your perspective, what’s the biggest blind spot the housing and mortgage industries have as they plan for 2026?
Broadly speaking, I think there’s a lot of uncertainty about the economy: whether it will continue to outperform economists’ forecasts, or crumble under the weight of mounting consumer debt and the country’s $37 trillion national debt—the latter of which could cause bond yields to rise, taking mortgage rates higher with them. And the jury is still out on the ultimate impact of the Trump Administration’s tariff and immigration policies and their impact on the overall economy.
Closer to ground level, I don’t think either the mortgage industry or the real estate market has really come to grips with the growing problem of rising insurance premiums across the country. Will soaring premiums make it impossible for current homeowners to afford their homes? Will those higher costs mean lower home values so buyers can afford the properties? What happens when a homeowner or buyer finds out that homeowners’ insurance isn’t available? And are higher deductibles and being under-insured (two ways homeowners are trying to keep premiums from rising too much) going to result in more borrowers simply walking away from a property in the event of a catastrophic event, leaving the lender with a huge loss? This problem is going to get worse before it gets better, and it’s probably going to require cooperation between the mortgage and insurance industries, along with local and state governments and federal agencies.
Are there policy or regulatory decisions on the horizon that could meaningfully alter the housing or mortgage outlook next year?
The elephant in the room is whether Fannie Mae and Freddie Mac will be released from conservatorship. If they are—and if the release isn’t done thoughtfully and carefully—this could lead to massive market disruption, since they’re responsible for such an enormous share of all mortgages. Even if done correctly, it seems likely that mortgage rates will probably go up after a release, which will hardly improve the affordability challenges that are a major headwind today.
The Administration has been talking about making government lands and vacant or under-utilized government buildings available for the development of affordable housing, and has discussed working with state and local governments to provide incentives to developers to build more affordable homes as well. Either of those initiatives would help fill the void of entry-level homes for the millions of young adults who are currently unable to find a home they can afford to buy.
Based on your decades of market analysis, what’s the one key lesson from past cycles that industry leaders should keep front of mind in 2026?
There are no “quick fixes.” Market recovery simply takes time—almost always more time than anyone in the industry would like. We’re seeing signs that we might be in the early stages of a recovery: the number of homeowners with below-market mortgage rates has declined for two consecutive years; inventory of homes for sale is now above pre-pandemic levels in 15-20 states; home price appreciation has slowed down to below the rate of inflation—meaning that homes are actually less expensive this year than last in inflation-adjusted dollars; and demographic trends should be very positive over at least the next few years.
However, while all that is true, there’s nothing in the data to suggest an overnight return to sales volume hitting five or six million units—in all probability, we’ll be looking at relatively flat sales volume entering 2026, before beginning a gradual recovery late in the year and in 2027. The industry should plan accordingly, rather than hoping for rapid growth, and ultimately being disappointed.
