{"id":22696,"date":"2026-04-15T04:43:11","date_gmt":"2026-04-15T04:43:11","guid":{"rendered":"https:\/\/borrowingnexus.com\/?p=22696"},"modified":"2026-04-15T04:43:12","modified_gmt":"2026-04-15T04:43:12","slug":"top-economists-takes-on-a-gummed-up-economy","status":"publish","type":"post","link":"https:\/\/borrowingnexus.com\/?p=22696","title":{"rendered":"Top Economists\u2019 Takes On A Gummed-up Economy"},"content":{"rendered":"
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We\u2019re entering the second quarter of 2026, and the year already feels unexpected. At just over three months in, some key economic predictions for the year have had to be recast.<\/p>\n

For instance, the housing market started the year with mortgage rates on the downtrend. Home prices in many areas were also trending down or staying flat. It appeared we were headed for one of the better years for home affordability and home sales since COVID. However, continued volatility due to inflation and the war in Iran has thrown a wrench into things, and mortgage rates have climbed in recent weeks.<\/p>\n

\u201cWhile we don\u2019t know the duration or ultimate impacts of the Iran war, there is some reassurance to be found in our survey results,\u201d says Mark Hamrick, Bankrate senior economic analyst. \u201cWe should see some easing of long-term interest rates and relative stability for the job market.\u201d<\/p>\n

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\n While recession risks over the year are elevated, one is far from a sure thing. Volatility and uncertainty have become features of our everyday lives, but there remains opportunity including for employment and homeownership.<\/q>
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\n \u2014 Mark Hamrick, Bankrate senior economic analyst
\n <\/cite>\n <\/p><\/blockquote>\n<\/div>\n

Bankrate has been surveying the nation\u2019s top economists every quarter for a decade. Once again we asked them to peer into the looking glass to tell us what they expect in terms of mortgage rates, recession, unemployment and inflation.<\/p>\n

Economists\u2019 predictions on key economic numbers<\/h2>\n
\n\n\n\n\n\n\n\n\n\n\n
As of Q4 2025 end<\/strong><\/td>\nAs of Q1 2026 end<\/strong><\/td>\n<\/tr>\n
Likelihood of recession in the next year<\/td>\n28%<\/td>\n34%<\/td>\n<\/tr>\n
Average monthly number of non-farm payroll jobs added each month for the next year<\/td>\n64,500<\/td>\n41,000\u00a0<\/td>\n<\/tr>\n
Unemployment rate in the next 12 months<\/td>\n4.50% (by December 2026)<\/td>\n4.60% (by March 2027)<\/td>\n<\/tr>\n
30-year fixed mortgage rate by end of 2026<\/td>\nN\/A<\/td>\n6.05%<\/td>\n<\/tr>\n
Average 30-year fixed mortgage rate for 2026<\/td>\nN\/A<\/td>\n6.10%<\/td>\n<\/tr>\n
10-year Treasury yield by end of March 2027<\/td>\n4.03%<\/td>\n4.19%\u00a0<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n

Flirting with recession<\/h2>\n

One of the biggest changes in this quarter\u2019s survey was the rise in recession risk. The risk of recession increased from 28% at the end of last year, near the lowest it had been in several years, to 34% this quarter. The single most cited reason for increased recession odds is the war in Iran and its impact on the oil supply.<\/p>\n

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\n The rise in oil prices that we have seen so far isn’t enough to put the U.S. in a recession, but makes the economy more vulnerable to any additional shocks. Several economists noted that, while the U.S. may not be dependent on foreign oil, it\u2019s not immune to the effects of a global downturn.<\/q>
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\n \u2014 Michael Pearce, chief U.S. economist at Oxford Economics
\n <\/cite>\n <\/p><\/blockquote>\n<\/div>\n

The U.S. economy was already facing a number of headwinds, and the war in Iran added another on the list.<\/p>\n

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\n The convergence of forces driving higher recession odds include an escalating Middle East war pushing fuel, fertilizer, and critical input costs higher; persistent inflation above the Fed’s 2% target now in its fifth year; a labor market that is weakening; and a Federal Reserve that is effectively sidelined.<\/q>
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\n \u2014 Yelena Maleyev, senior economist for KPMG
\n <\/cite>\n <\/p><\/blockquote>\n<\/div>\n

Housing and jobs are on ice for 2026<\/h2>\n

All of this could understandably make choosing to buy a home or invest in your current one feel like a risky decision in today\u2019s economy. If you feel stuck in your job or in your housing situation, you can reasonably blame macroeconomic reasons for it. Home sales have slowed significantly since 2022 and job growth has remained stale for the past year. Many of the economists surveyed expect little to change this year.<\/p>\n

\u201cWe anticipate that employment growth will persist at a subdued pace throughout 2028.\u201d According to Saidel-Baker, layoff numbers are lower than they were this time last year. For those ages 25 to 54, the labor force participation rate is at its highest level in 20 years.<\/p>\n

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\n This trend suggests there is little slack in the labor market to fill the gaps when hiring accelerates later this year.<\/q>
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\n \u2014 Lauren Saidel-Baker, economist at ITR Economics Quarterly.
\n <\/cite>\n <\/p><\/blockquote>\n<\/div>\n

Several economists expect the job market to remain in a low-fire, low-hire mode throughout the year, with both labor supply and demand slowing. That\u2019s a bit of a double-edged sword for workers; they may not feel a risk of being laid off, but the ability to change jobs may not be there, either.<\/p>\n

This slowing labor supply and demand effect impacts\u00a0 the housing market, too.<\/p>\n

\u201cThe housing market continues to suffer from a shortage of supply, while rising mortgage rates are keeping buyers sidelined yet again,\u201d says Maleyev with KPMG. \u201cHome values continue to rise nationally, albeit more slowly, and the equity in homes remains substantial even as some pockets see declines.<\/p>\n

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The more troubling trend is the sharp slowdown in geographic mobility: only affluent households can now afford to relocate for better job opportunities. That adds to structural unemployment and deepens inequality.<\/p>\n

\u2014 Yelena Maleyev<\/cite>
\n Senior economist, KPMG<\/span>\n <\/p><\/blockquote>\n

The good news is that the economists surveyed predict 30-year fixed mortgage rates to fall to 6.05% by the end of the year: noticeably lower than where rates currently sit at around 6.5%.\u00a0<\/p>\n

\u201cIf, as our survey indicates, average 30-year fixed mortgage rates move closer to 6% by year-end, that provides some relief for buyers and sellers alike,\u201d Hamrick says.<\/p>\n

The lock-in effect will ease, slowly<\/h2>\n

Part of what\u2019s kept the housing market so tight is that many current homeowners have mortgage rates near 4% or below at a time when, over the past three years, rates have ranged from 6%-8%.\u00a0 Many homeowners who bought at the start of the decade couldn\u2019t afford to repurchase their current home at today\u2019s prices and rates. This has kept people from selling, leading to a restriction in supply. However, the further we get from the low rates last seen in the early 2020s, the more normalized a 6% or higher rate becomes. <\/p>\n

\u201cThe lock-in effect will linger, but the worst of the lock-in shortage of inventory is over,\u201d says Lawrence Yun, chief economist at the National Association of Realtors (NAR).\u00a0<\/p>\n

Additionally, Hamrick points out, Freddie Mac\u2019s long-term average rate is 7.70%, so today\u2019s rates are not historically out of line. On top of that, new construction in many markets in the south and west has increased supply, and home sale prices are declining or leveling out in these markets.\u00a0<\/p>\n

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\n While the average rate on outstanding mortgage debt is around 4.4%, rates don\u2019t need to return to that level to get the market moving. We would expect a pickup in activity as mortgage rates move into the 5 percent range, particularly given the significant pent-up demand and below-trend existing-home sales in recent years.<\/q>
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\n \u2014 Odeta Kushi, deputy chief economist at First American Financial Corporation
\n <\/cite>\n <\/p><\/blockquote>\n<\/div>\n

Still, buyers and homeowners face continue to economic headwinds. Even if mortgage rates drop meaningfully this year, the costs of owning a home are likely to continue to rise.<\/p>\n

Inflation is back in a big way<\/h2>\n

The Fed never fully pushed inflation back to its 2% target, but things were stabilizing and inflation was slowing as we headed into 2026. That chapter may be changing again, though, with the war in Iran and increased global tensions. On April 10, new Consumer Price Index data showed that inflation increased to 3.3% for March. That\u2019s up by 0.9% from February \u2014 the sharpest month-over-month increase since June 2022. What\u2019s more, even if this war ends tomorrow, the rising costs due to oil supply disruption and trade restriction will likely linger.<\/p>\n

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\n The war will put substantial upward pressure on inflation. And the initial jump in inflation will likely be followed by elevated inflation for a longer period of time. Absent a sharp slowdown in the economy, it is hard to see how inflation reaches the Fed’s target quickly.<\/q>
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\n \u2014 Mike Fratantoni, chief economist for the Mortgage Bankers Association
\n <\/cite>\n <\/p><\/blockquote>\n<\/div>\n

But how long will elevated inflation last? Over 94% of the economists Bankrate surveyed say inflation may take until at least the end of 2027 to fall inline with the Fed\u2019s 2% target. A full 44% push it out further: by the end of 2028 to hit the 2% benchmark.\u00a0<\/p>\n

For homebuyers and homeowners, these rising costs could trickle into their world. Homebuilders \u2014 already struggling with lower demand, high tariffs and a waning workforce \u2014 may be less likely to add more construction if costs rise. Homeowners could feel rising oil prices in their utility bills and through further market inflation that could make maintaining and upgrading their homes more expensive.<\/p>\n

Reasons for cautious optimism<\/h2>\n

Despite multiple threats to the economy, it could be worse. After all, even a 34% chance of recession still puts the odds in overwhelming favor of a recession not <\/em>happening. Here are some of the reasons economists think there\u2019s a case for cautious optimism:<\/p>\n