Unmasking the housing market monsters of 2026

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Molly Boesel:

Yeah. Well, one of the great things about working at Cotality is we have a ton of data, right? So we can look at our property data. We have a lot of property data. We have tax data. We have insurance data. We can combine all that and also with our mortgage servicing data and see how much those costs have risen over time.

Maiclaire Bolton Smith:

Welcome to Beyond the Buildings by Cotality. I am your host, Maiclaire Bolton-Smith, and I'm just as curious as you are about everything that happens in the property industry. On this podcast, we satisfy your collective curiosity, explore questions from every angle, and look beyond the obvious. With every conversation, we illuminate what is possible. Every house has a history and every property holds its secrets, but the real scary stories aren't found in the dusty attics. They're in mortgage statements, tax assessments, and construction pipelines. And those stories become reality for thousands of homeowners who are facing unexpected costs and shifting inventories. Navigating today's market means looking past the surface to understand the true underlying economics of supply, demand, and the total cost of ownership. It takes real property intelligence and some expert analysis to see through the fog and figure out where the market is headed next. So that's why Cotality's senior principal economist, Molly Boesel is back with us to look behind the curtain at the housing market's spookiest trends.

Molly, welcome back to Beyond the Buildings.

Molly Boesel:

It's great to be here again, Maiclaire.

Allie Barefoot:

Before we get too far in this episode, here's a friendly reminder about how to see what's coming up next in the property market. To make it easy, we curate the latest insight and analysis for you online. Find us using the handle @cotality on all of our social media channels. But now let's get back to the show.

Maiclaire Bolton Smith:

This is one of my favorite episodes to do with you. You and I have done this spooky season episode for a few years now and it's so fun.

Molly Boesel:

Yeah, it's unfortunate that there's still a lot of spookiness in the housing market.

Maiclaire Bolton Smith:

That's true. Well, let's just kind of get into it. So we're going to look at the monsters in the market, if you will. So our first housing monster is the rent werewolf. Rents across the country, I feel like we've been talking about this for a long time. They're constantly changing shape. In some parts of the US, they're cooling, but in other areas they're really heating up. So how is this shifting the traditional math for potential first-time home buyers?

Molly Boesel:

Yeah. Well, you're right. Single family rents are still increasing. In fact, the Cotality single-family rent index we just put out shows that the annual increase at the national level is back to its long run range. That's the first time that's happened in a year. So we're still seeing single-family rents increase. Exactly. Wow. They're up about 2% nationally, but of course we talk about metros and they vary. We have decreases in only two metros. Cape Coral's got a 4% decrease, but the increases are all the way up to 28% in Abilene Texas. That year over year increase. That's insane. It is. It's insane. Wow. So yeah, so rents are a real issue. And even with decreases in Cape Coral, they're still up about 10% over five years. So even if you're seeing the increases slow down or decrease in some places, still rents are up a lot.

And so what does that mean? We can talk about percentages all we want, but those who are renting and are looking to buy, they're going to have a much harder time saving for their down payment and that could delay their purchase.

Maiclaire Bolton Smith:

Wow. Yeah, that is a spooky monster right there.

Molly Boesel:

Yeah, definitely.

Maiclaire Bolton Smith:

Okay. So let's talk about new construction because building new homes is supposed to relieve pressure on the market, but it seems that the, let's call it the construction cost curse is slowing the effects of that relief. So between elevated labor prices, expensive materials, rising builder insurance and regulatory hurdles, new construction is just really expensive. So how are all of these compounding costs holding back the affordability on this inventory? And I guess is there a way for us to see which viable sites of where there might be affordability for homeowners and still ROI for the developers?

Molly Boesel:

Sure, sure. Yeah. So we talk about the three Ls, land, labor, lumber. They're all expensive right now. So that's driving up the price of building. And if builders need to pay a lot for say a piece of land or the labor or the construction materials, they're going to have to charge a lot for that home. So their incentive is really to build a kind of bigger, more expensive home. So that leaves the starter homes behind. How could we solve this? It's a tough one, right? I know localities all over the US are working on this and zoning could help. If some localities would allow builders to build on smaller lots, create more density, maybe build more town homes. We call that the missing middle, if there could be a little bit of that, that could help at the affordability level. But builders do, they need to make money on their purchase.

So again, they're incentivized to build bigger and more expensive homes.

Maiclaire Bolton Smith:

Yeah, because ultimately, yes, we want people to get into homes, but this is the industry for these builders and they do need to remain profitable as well. And it's just driving up the cost.

Molly Boesel:

Exactly.

Allie Barefoot:

At Cotality, we see signals shift even before they make headlines. Rising rents, new data center projects and migration influxes are layered together to reveal where investment is coming and whether the area is prime for supporting projects. With billions coming into communities, the cloud isn't so invisible anymore and it's actively remapping the US housing market. That's why our models are built with core AI technology. We make sense of the data to help you see the bigger picture. Learn more at Cotality.com/our-data.

Maiclaire Bolton Smith:

Okay. Perhaps one of the spookiest of our phenomenons that is keeping the inventory frozen is the lock-in ghost. So millions of homeowners are still sitting on these ultra low mortgage rates that they got during the pandemic and they're terrified to make a move in the market. So what will it take to finally, I guess you could say, exercise this ghost and change the lock-in effect from these home sales.

Molly Boesel:

I like that, an exorcism. Yes. Well, over time we do have transactions, right? So let's just forget about the lock-in for a second here, but mortgage rates are very high, right? So that's slowed down transactions across the board. So the people who are buying homes and selling homes, they're the ones who kind of need to move. So there's that slowness in the market there. Now to really unlock some supply, we really need mortgage rates to fall. So what did you say? We're sitting around, most borrowers have rates under 4%. So we know they're not going back that low. We're not getting rates back to 4%, even probably 5% anytime soon, but they don't need to fall that far. So millions of borrowers have transacted in the past four years since rates have gone up. And if rates would just fall just a little bit, we could unlock some potential supply.

So I don't like to give a magic number, but I'm going to try. A magic number could be around, let's just say six and a quarter percent. And how do I come up with that one? Well, I can look at the outstanding mortgages right now and I can see that about 15% of all outstanding mortgages have rates above six and a quarter percent. So if you're locked in and you're just going to trade the same rate, you're not really going to be locked in then. So that could be our magic number to unlock things. So six and a quarter is probably where we'll see some action.

Maiclaire Bolton Smith:

Well, we will keep watching to see how that one unfolds. I guess with these ghosts in the attic, we often talk about how the high interest rates have made the mortgage more expensive, but we've got the escrow poltergeist spooking around as well. And when we look at the total cost of home ownership and the total payment, these escrow fees, which are property taxes, insurance premiums, those are skyrocketing. There's HOA fees which are increasing as well, and it's making that monthly mortgage payment increase and that is scary for a lot of homeowners. How do we at Cotality track the non-mortgage inflation and does it pose any kind of risk to mortgage delinquency if we look long-term down the road?

Molly Boesel:

Yeah. Well, one of the great things about working at Cotality is we have a ton of data, right? So we can look at our property data. We have a lot of property data. We have tax data. We have insurance data. We can combine all that and also with our mortgage servicing data and see how much those costs have risen over time. So you're right, they're up a lot. So escrow costs have increased 45% nationally since 2019. Okay, that's a national average.

Maiclaire Bolton Smith:

I believe it.

Molly Boesel:

Okay. In Colorado, 77% increase. Florida, 70%. 77% increase in the escrow costs in Colorado.

Maiclaire Bolton Smith:

Oh my goodness. That is terrifying.

Molly Boesel:

Exactly. Exactly. Right. Wow. So say you bought a home in 2019 and you thought you locked in your fixed rate payment, but you forgot that perhaps your non-mortgage costs are going to go up and then your escrow goes up 77%. That's a shock to the budget, the monthly budget.

Maiclaire Bolton Smith:

Yeah, absolutely.

Molly Boesel:

And that could cause some delinquency risk, but we haven't really seen delinquencies go up across the board yet, but that could cause some delinquency risks, especially for those borrowers who are stretching to begin with.

Maiclaire Bolton Smith:

Yeah, no, absolutely. Okay. I mean, depending on where you live and we look at inventory, it can be very different. Let's call it the shape shifter supply. If we look at this, can you just give us the lay of the land currently and how are hyper-local market signals helping investors navigate this split?

Molly Boesel:

Yeah. So let me talk a bit first about where they're going up, where they're going down. Inventories are really tight in the Midwest and the Northeast. So inventories are kind of going up in Florida, Arizona, just in general and metros and those areas. But that has a real impact on home prices. So where inventories are tight, you're going to see prices pushed up. It's going to lower affordability. When we're thinking about investors, they're going to look at that local inventory. They're going to look at rents because most of these investors are renting things out and they're going to also look at demand trends. So then they're really going to do that to find those markets where they're most likely to make gains in their investment.

Maiclaire Bolton Smith:

Okay. Yeah, that would make sense because I mean ultimately it's what we talked about with the developers that this is their business and they still do need to be profitable in this market.

Molly Boesel:

Exactly. And with rents going up, that does incentivize some investors to stay in some of those markets. They may look expensive to us, but they know they'll be able to charge some increased rents in those areas. Yeah,

Maiclaire Bolton Smith:

Opportunity for sure.

Allie Barefoot:

It's set time again. Cotality just dropped new numbers about what's happening in the housing market. Here's what you need to know. Everybody's talking about AI. As a result, the cloud isn't so invisible anymore and it's actively remapping the US housing market. While anchor hubs grab headlines, a secondary wave of infrastructure is surging into unexpected markets like rural Arkansas. Driven by this tech influx, the state averaged nearly 84,000 new residents annually, a 6% jump over pre-pandemic levels, pushing home prices in the Little Rock Metro area up 8.1% to historic highs. This shift signals that tech growth is no longer just about power grids and cheap acreage. Expansion now depends heavily on local housing capacity and public trust. As billions in tech capital land in smaller communities, developers must evaluate housing availability and local sentiment with the same rigor as power supplies to prove the physical weight of the cloud is worth bearing.

To read the full report, visitcotality.com/insights, and that's a sip. See you next time.

Maiclaire Bolton Smith:

Okay, Molly, I always like to finish with our crystal ball and that crystal ball is a spooky one this time. It's got extra smoke in it and maybe a little bit of glitter even. If we had to look at it in the

Molly Boesel:

Future - I could put on my witches hat for this one.

Maiclaire Bolton Smith:

You get your spooky crystal ball out and try and look at what the spooky forces are going to look like. Do you expect these spooky market forces to ease at all within maybe even by late 2027? And we'll get to... I mean, I want to say, do you think we'll ever get to normal market liquidity ever again, but does normal market liquidity even exist anymore or have we just established a new normal and it's just going to be like this forever and continue from here? Clear the smoke and the glitter from your crystal ball and what does it look like?

Molly Boesel:

So normal in the housing market are hard to pair up, but if we want to think about a healthy housing market, it's where we're having transactions where we're selling homes and people are moving. And by late 2027, could I say some of those monsters under the bed, they may be lessening, right? There may be fewer monsters under the bed. Probably not a completely normal market. I think the biggest impediment to this is mortgage rates. But again, if we would see mortgage rates come down just a bit, they're around 7% now. If they would come down about, I don't know, like I said, about six and a quarter, we could see getting some transactions moving and maybe heading towards a higher liquidity in the market.

Maiclaire Bolton Smith:

Yeah. Well, we will be here to see how things progress throughout the next... Well, by the time we get back to our spooky episode next year, Molly, we'll have to see how spooky the market continued to be. So Molly, I love chatting with you on these podcasts. So as always, thank you so much for joining me today on Beyond the Buildings by Cotality.

Molly Boesel:

Yeah. Thanks, Maiclaire. This is one of the best things I do for my job.

Maiclaire Bolton Smith:

I love it. And thank you for listening. I hope you've enjoyed our latest episode. Please remember to leave us a review and let us know your thoughts and subscribe wherever you get your podcast to be notified when new episodes are released. And thanks to the team for helping bring this podcast to life. Producer Jesse Devins, editor and sound engineer, Romia Roman, our facts guru, Allie Barefoot, and social media duo, Sarah Buck and Mikayla Brooks. Tune in next time for another conversation that illuminates the ideas that will define the future.

Allie Barefoot:

You still there? Well, thanks for sticking around. Are you curious to know a little bit more about who we spoke with today? Molly Boesel is a senior principal economist in the office of the chief economist at Cotality. She's responsible for analyzing and forecasting housing and mortgage market trends, including the single family rental market. She has a depth of expertise in mortgage market analysis, model development, and risk analysis in the housing finance industry. Her original research appears on the Cotality Insights blog, which can be found at Cotality.com/insights.

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