BENGALURU – Home prices in the U.S. are expected to increase at a steady pace over the next few years, fueled by a modest anticipated decline in mortgage rates. But escalating tariffs imposed under former President Donald Trump’s trade policies are poised to hinder the construction of affordable housing, according to a recent Reuters poll of property market experts.

The survey, conducted from May 19 to June 3 and comprising responses from 27 property analysts, projects U.S. home prices—based on the S&P CoreLogic Case-Shiller index of 20 major metropolitan areas—will rise 3.5% annually through 2027. If realized, this would mark the slowest rate of growth in home prices since 2011, yet still reflects a housing market that remains out of reach for many Americans.

“The housing market remains in a cooler phase as sellers continue to adjust to looser conditions after the red-hot pandemic years,” said Thomas Ryan, an economist at Capital Economics.

Although analysts had previously predicted improved affordability in 2025, largely on hopes of Federal Reserve interest rate cuts, that optimism has dimmed. A sweeping tax-cut and spending bill passed by Congress is projected to add $3.3 trillion to the national debt by 2034, according to the Committee for a Responsible Federal Budget, which has contributed to a rise in long-term bond yields and, in turn, limited the extent to which mortgage rates can fall.

“Looking ahead through the rest of this year and into 2026, we don’t expect mortgage rates to come down much—at least not through the third quarter of 2025—so affordability will remain pressured,” said James Egan, housing strategist at Morgan Stanley.

The poll showed 30-year mortgage rates are expected to average 6.73% in 2025, easing only slightly from the current 6.98%. Rates are forecast to decline further to 6.33% in 2026 and 6.29% in 2027, still far above the historically low 3% range that defined the pandemic-era market boom.

“If mortgage rates were to drop meaningfully—say by 50 to 100 basis points—we could see a surge in buying activity. But rates really need to come down first,” said Lawrence Yun, chief economist at the National Association of Realtors.

Tariffs Raise Alarm Over Affordable Housing Supply

Construction activity is already under pressure. April saw an unexpected decline in spending on single-family housing, while a growing inventory of unsold homes suggests buyers are struggling to afford what’s on the market. The outlook worsens when factoring in newly implemented tariffs on imports, which analysts overwhelmingly agree will impact affordability and supply.

“While there’s still a lot of uncertainty about what level of tariffs are ultimately going to be implemented, they’re going to make it more expensive to build,” said Egan. “You’ll see either fewer homes built, smaller homes built, or a combination of both.”

Of the 24 analysts who responded to a specific question on the impact of tariffs, 21—nearly 90%—said the new trade barriers would result in fewer affordable homes being built. Two of them emphasized “far fewer.” Only three predicted no impact.

“President Trump’s inflationary trade and immigration policies leave no clear path to the lower borrowing costs the housing market desperately needs,” said Ryan, who no longer expects any additional Fed rate cuts in 2025.

This pessimistic shift was also reflected in analysts’ forecasts for first-time homebuyer affordability. Only half of respondents, 12 of 24, now expect purchasing conditions to improve in the coming year—a notable decline from 62% in the February edition of the survey.

Sales Forecast Remains Tepid

Existing home sales, which account for over 90% of total housing transactions in the U.S., are projected to remain sluggish. Analysts expect an annualized rate of around 4 million units in the next quarter, with only a slight rise to 4.1 million by the end of the year. That remains well below the 15-year peak of 6.6 million units recorded in early 2021.

As affordability remains strained and tariffs put further pressure on construction costs, analysts warn that the long-standing structural housing shortage in the U.S. will persist. The National Association of Home Builders estimates that at least 1.5 million additional housing units are needed to stabilize the market.

“What we have is a supply problem,” said John Hunt, chief analyst at housing research firm MarketNsight. “The more we can build, the less upward pressure there is on price… [and] the more folks can afford a home.”

Originally reported by Sarupya Ganguly in Reuters.