Force 1

A New Fed Chair With His Own Playbook

The Federal Reserve has a new chair, and new chairs have their own philosophy about how aggressively to use the tools available to them. The market does not yet have a fully calibrated read on how this particular leadership will respond to persistent inflation, slowing growth, or geopolitical instability. That uncertainty alone keeps long-term rates from settling, because bond markets are pricing in a range of possible Fed responses rather than a known one.

What this means practically: the 10-year Treasury, which is the real driver of where 30-year mortgage rates land, is unlikely to find a stable floor until the market has more clarity on Fed policy direction. That clarity typically comes from a few data cycles and one or two meaningful rate decisions. We may get it in Q3. We may not get it until Q4. Either way, rate volatility in the second half of 2026 is more likely than rate stability.

Force 2

A Ceasefire That Has Not Resolved the Underlying Tension

A ceasefire on a conflict the broader world has grown weary of is not the same as resolution. Energy markets in particular respond to this distinction. Fuel prices that surged during active conflict phases do not automatically retreat when a ceasefire is announced, especially when the underlying geopolitical tensions that made the conflict possible remain intact.

Higher fuel costs are not a housing headline on their own. But they are an inflation headline. And inflation that is already sticky becomes stickier when energy costs stay elevated. That keeps the Fed's hands less free than buyers would prefer, and it keeps consumer confidence from recovering as quickly as the ceasefire news alone might suggest.

Force 3

Sticky Inflation That Tariffs Are Not Helping

The March 2026 CPI reading came in above 4 percent for the first time in a long time, per the U.S. Bureau of Labor Statistics. That is not a catastrophic number. But it is a stubborn one. And tariff-driven cost increases on imported goods are adding a layer of inflation pressure that is structural rather than cyclical. You cannot simply wait it out. The costs are embedded until the policy changes or the supply chains fully reroute.

For the housing market, this matters because it keeps the Fed from cutting rates with the confidence it had during the easing cycle of 2024 and early 2025. And it keeps buyers calculating their monthly payments against a moving rate target rather than a stable one.

Force 4

An Election Year, Which Always Does Something to Sentiment

2026 is a midterm election year. Election years introduce policy uncertainty that tends to moderate both buyer and seller behavior, not because elections directly change mortgage rates or home prices in the short term, but because people make large financial decisions with less confidence when they are uncertain about what the policy environment will look like 12 months from now. This is well-documented in National Association of Realtors historical transaction data.

The effect in midterm years specifically tends to be a softening of volume rather than a dramatic shift in prices. Fewer transactions, not a crash. Buyers wait slightly longer. Sellers hold slightly more tightly. The market does not stop. It just operates at a lower tempo.

Forecast: Prices

Soft Prices. Not Falling Prices.

Across the Greater Seattle area, I expect price appreciation to continue slowing through Q3, with some segments seeing flat or slightly negative movement in months-over-month comparisons. This will generate headlines that say prices are falling. Most of those headlines will be technically accurate and contextually misleading.

Flat to slightly soft prices in a market that saw significant appreciation from 2019 through 2023 are not a crisis. They are a normalization. The difference matters for how you make decisions. A seller pricing for 2022 appreciation levels will struggle. A seller pricing accurately against Q2 2026 comps will move their home.

In desirable Eastside submarkets with strong employment proximity and limited inventory, I expect continued single-digit year-over-year appreciation. The market is not uniform and the forecast should not be treated as if it is.

Forecast: Inventory

Balanced. Finally, Actually Balanced.

Inventory in the Greater Seattle market has been working toward balance for 18 months. The second half of 2026 is likely to be the period where we actually arrive there, at least in most submarkets. This means buyers have more choices than they did in 2021 through 2023 without facing the kind of oversupply that creates downward price pressure.

A balanced market is a healthy market. It is not a buyer's market that sellers should panic about. It is not a seller's market that buyers should despair over. It is a market where preparation and pricing discipline matter more than timing bets.

Forecast: Distress

A Slight Uptick in Foreclosures. Not a Wave.

Foreclosure activity has been suppressed since 2020 by a combination of equity buffers, forbearance programs, and a strong employment market. Some of that protection is thinning. Buyers who stretched in 2022 at peak prices and peak rates may be in positions that have become harder to maintain as the overall cost of living has increased.

I expect a modest increase in distressed inventory to appear in the second half of 2026. This is not a 2008 scenario. The equity levels in the market are not comparable, and the credit quality of the loans originated since 2009 is dramatically better than what preceded the financial crisis. But a slight uptick in foreclosure filings is worth watching and worth knowing about if you are in the market as a buyer looking for value.