In a forecast ahead of the year published on January 27, analysts said that price growth will stop at 0% in 2026 after almost doubling in the past decade, with a slight increase in demand likely neutralizing a supply uptick.

Helping buyers is an expected drop in adjustable-rate mortgages as the Federal Reserve continues to lower borrowing costs later this year, although the 30-year fixed rate remains above 6%. On top of that, homebuilders will continue to offer discount rate purchases to clear unsold inventory.

“We think this will be enough, along with an increased wealth effect, to move demand higher as supply increases lower,” John Sim, head of securitized products research at JPMorgan, said in the note.

A year of prices remaining steady will mark a further slowdown after prospective buyers balked at last year’s tough prices, as many owners began putting their homes up for sale. The pent-up demand has forced some sellers to pull their listings from the market or slash their asking prices.

According to the latest data from the Federal Housing Finance Agency, home prices in November rose 1.9% from a year ago, up from 4.8% annual growth in October.

But in regions where housing supply has grown significantly during the pandemic boom in construction, home prices have actually declined. JPMorgan said prices are falling fastest on the West Coast and the Sun Belt.

While the bank did not mention Texas and Florida specifically in its note, those states saw particular vulnerability. Builders rushed to add new supply as Americans moved there from more expensive cities. But now that overhang is weighing on markets. According to Zillow, Texas home prices decreased 2.4% from a year ago, and Florida home prices less than 5.1%.

JPMorgan also estimates that the overall US housing market has a shortfall of about 1.2 million homes, although that is well below the consensus view as supply has grown in recent months. And looking back over the past 30 years, housing completions have essentially matched household formation.

“Overbuilding is a sure-fire way to lower house prices, and builders are navigating the increased supply of new homes,” Sim added.

Trump: ‘I want to raise housing prices’

JPMorgan sees only a gradual improvement in home sales this year as Trump’s efforts to make housing more affordable have failed to have much impact.

He proposed banning institutional investors from buying single-family homes in hopes that first-time buyers would face less competition. But JPMorgan pointed out that such a ban “is unlikely to be a game changer,” noting that institutional investors account for only 1%-3% of the market. In addition, many institutional investors have entered the housing market to supply the rental market.

“If the proposed ban also prevents these large operators from building their own homes or communities, we believe it could have the opposite effect and theoretically restrict the overall supply, because it would prevent more rental homes from entering the market,” said Michael Rehaut, head of US homebuilding and research products at JPMorgan.

To lower mortgage rates to reduce borrowing costs, Trump also ordered Freddie Mac and Fannie Mae to buy up to $200 billion in mortgage-backed securities.

JPMorgan noted that the $200 billion purchase represents only 1.4% of the $14.5 trillion mortgage market and could cut rates by 10-15 basis points at most. In fact, while the intervention quickly lowered rates, they rebounded a few weeks later.

“Second, most homebuilders are already offering potential buyers mortgage rate buydowns of 100 bp to 200 bp below the prevailing mortgage rate,” added Rehaut. “As a result, we do not believe that a moderate lowering of the mortgage rate in the market will have a material impact on demand.”

Meanwhile, Trump has signaled that he does not want to take any action that would lower home prices and indeed prefer to send prices higher.

During a meeting of the Cabinet on January 29, he said that many people saw their wealth increase last year due to their homes appreciating, adding that house prices will decrease when buying houses has become easy and cheap.

“I don’t want to lower housing prices. I want to raise housing prices for people who own their homes, and they can make sure that’s what’s going to happen,” Trump said.