The US housing market might stay frozen longer than people hope.
Economic intelligence firm Pantheon Macroeconomics laid out a sobering case for why the housing market won't revive anytime soon. Senior economist Oliver Allen identified three major headwinds:
Stretched affordability - homes are too expensive relative to incomes
High mortgage rates - even at 6.30%, rates remain elevated
Struggling labor market - fewer people feel secure enough to buy
"A serious and sustained housing market recovery is unlikely anytime soon," Allen said.
August brought some hope. New home sales rose to a three-year high, prompting speculation the market might finally be thawing.
But Allen argues those green shoots don't signal a real recovery. "Housing market activity, however, remains very depressed despite the recent signs of improvement," he said. "Pending sales are still roughly 30% below their average pre-pandemic level."
That 30% gap is massive. It means even with August's uptick, the market is nowhere near healthy functioning.
The Federal Reserve cut rates again Wednesday, with more cuts expected. Some commentators think this will unlock the housing market.
Allen acknowledges mortgage rates have improved. The average 30-year rate dropped to 6.30% last week from nearly 7% in late May. "That indicates sales will rise a bit further over the next few months," he said.
But a bit further isn't enough. Rates around 6.30% are still high by historical standards. Many homeowners locked into 3% or 4% rates during the pandemic won't move unless rates drop much lower.
Even if mortgage rates fall, homes are expensive. Prices rose throughout 2025 despite weak demand because sellers refused to cut prices. Many simply delisted their homes rather than accept lower offers.
That stubborn pricing strategy kept affordability stretched. Monthly mortgage payments consume a much larger share of household income than they did pre-pandemic. Until prices adjust downward or incomes rise significantly, many potential buyers remain priced out.
A weak labor market makes everything worse. When people feel insecure about their jobs or struggle to find work, buying a home becomes risky.
The US labor market has cooled considerably. Job growth slowed and unemployment ticked higher throughout 2025. That uncertainty keeps potential buyers on the sidelines even if they can technically afford a home.
The housing market affects the broader economy. When people buy homes, they also buy furniture, appliances, and home improvement materials. They hire movers, contractors, and landscapers. A frozen housing market means less economic activity across many sectors.
For aspiring homeowners who've been waiting years for conditions to improve, Allen's assessment is disappointing. The market spent much of 2025 in gridlock, and Pantheon doesn't see that changing anytime soon.
Despite some positive signs, the housing market remains deeply stuck.
Mortgage rates falling from 7% to 6.30% helps a little. August's sales bump shows some life. But underlying conditions - affordability, rates still above 6%, weak labor market - prevent a real recovery.
Allen's "dark ages" framing captures the frustration. The market isn't getting worse, but it's not getting better enough to matter. Pending sales 30% below pre-pandemic levels tell the real story.
For buyers waiting for the perfect moment, that moment isn't coming soon. For sellers hoping to fetch 2021 prices, those days are over. The market is stuck in an uncomfortable middle ground where neither side wants to compromise.
The Fed's rate cuts will help gradually. But "gradually" means months or years, not weeks. Anyone expecting a quick housing market revival based on recent data is likely setting themselves up for disappointment.