Anne Hartnett

Hi, I’m Anne Hartnett with Agent Publishing. I’m joined today again by Matthew Gardner, chief economist at Gardner Economics, to break down what we’re seeing so far in Q2 and the first half of 2026. Thanks for joining me again today, Matthew.

Matthew Gardner

Anne, always a pleasure to see you.

Hartnett

Congress has just passed one of the most significant bipartisan housing bills in decades. Will buyers and sellers notice any tangible changes over the next 12 months, or are the biggest benefits of this legislation likely to take years to materialize?

Gardner

Well, here we are talking about a huge bill, the 21st Century ROAD to Housing Act. Now it is a massive bill. There’s a couple of parts in it which I think are particularly interesting.

Now, the first one, the one that seems to have got the most attention, is the institutional investor ban. And here, Section 901, it effectively blocks entities from controlling more than 350 properties, and they can’t buy any more than that. Their goal, obviously, is to try and give households a fairer shot at buying those homes.

But here’s the problem: In my opinion, and the opinions of many, institutions are actually a marginal factor when it comes to the overall housing shortage. They’re not a primary driver of it. But also, there’s a build-to-rent exception. Now that means that there’s a 350 a unit threshold, which is, one, it leaves most large operations room to keep on operating as they did before. They own less than that. But the exception that there is basically says you can’t buy more than that. But more importantly, you can, but you have to sell them basically after seven years. So I really think the impact is going to be very, very limited. I mean, the country needs single family rentals. Households don’t always want to live in an apartment and most are build-to-rent. So, limited impact.

The second part is the manufactured and modular housing modernization component. I know it’s quite a mouthful, but here what they’re doing is they remove what was a somewhat restrictive part of it, which was, every mobile home had to have a permanent chassis. And that was really, quite frankly, for moving these units around. Now, by taking that away, that certainly lowers production costs of those mobile homes. And that’s going to help for retirees, the rural population, also potentially first-time buyers, because it added actually $5,000 to $10,000 to the cost of the unit. Now, more importantly, in my opinion, than that, is that if you take that away, well then traditional lenders can look at the house being a house, not a chattel, which is what it was considered when it had that chassis attached. So that means that you can actually likely get a lower mortgage rate. That’s a positive.

The final thing is cutting regulatory red tape. It streamlines the federal permitting process, modernizes the local zoning frameworks, speeds up construction review timelines. Those are all positive. But — now it does offer grants for zoning reforms. But it preserves local authority, meaning that it’s down to the local authority what they want to do. They cannot force a jurisdiction to change their restrictive zoning or change their building codes. So because of that, I think that’s going to have somewhat limited impact as well. And the bottom line is, it’s the interest rate factor. Federal policy cannot control the broader economy. So even if a builder increases supply, a lot of buyers are still going to struggle with affordability given where mortgage rates are right now. So the short-slash-long answer to your question is that it’s a good thing for mobile home buyers, but it doesn’t address the core issue of supply and high mortgage rates.

Hartnett

When we spoke after the first quarter, uncertainty centered on mortgage rates and the broader economy. Since then, we’ve seen geopolitical tensions escalate. Inflation remains stubborn, and expectations around Fed policy shift. Which of those developments do you believe will have the most lasting impact on housing and why?

Gardner

Well, of course, all three of those are actually interrelated. And I say this because where we are now, right now, geopolitical tensions have certainly pushed inflation higher. And that has led the Fed to adjust course as one of their two mandates is price stability — another way of saying that they want to keep inflation at or around 2%.

But if I was to take each of those three things you mentioned in isolation? Let’s say that if we see inflation remaining elevated, well, that’s the one thing that I think would have the potential for more lasting structural impact on the housing market. The reason why I say this is because bond yields are driven by inflation, because no one’s going to accept a yield or an interest rate of return on their bond investments that’s below the rate of inflation. They’d be losing money. And two, it forces the Fed’s hand. Now, they raise the fed funds rate because they want to lower inflation. That echoes along the yield curve. And if yields on the 10 Year Treasury, which is in essence the benchmark for 30-year mortgages, that remains high, then mortgage rates will certainly follow suit. So Fed tightening will lead indirectly to higher mortgage rates.

However, over and above the impact of mortgage rates, well, the current geopolitical conflict, it’s triggered a spike in energy prices, something all of us are feeling today when we go and try and fill up our gas tanks for anything less than $100. But if we see systemic inflation or a hardening of the baseline cost of raw materials, then housing becomes more expensive to build. And builders will not start construction on a home that would be priced well above the level that the market would accept, so they’re not going to increase supply.

And finally, inflation hits home owners because insurance premiums, property taxes and certainly maintenance costs generally rise with higher inflation. And that directly impacts their pocketbooks, and then they become less likely to want to move or or upgrade their residences. So the issue, as I see it, that could have the most lasting impact on the housing market? I’d have to say inflation, should the Federal Reserve not get it under control. They can only really do that if the conflict between the United States and Iran comes to an end.

Hartnett

There was an expectation that a new Fed chair might lead to a different approach on interest rates. But what we’ve seen so far, has anything materially changed?

Gardner

Well, yes. The transition to Fed Chair Kevin Warsh has brought a material, and quite frankly, stark shift in policy approach. But it’s not in the direction that markets or quite frankly, the White House, originally anticipated.

You see, look, rather than executing an aggressive move to cut interest rates — certainly that’s what President Trump publicly campaigned for — Warsh actually surprised Wall Street by adopting an explicitly hawkish and independent stance since he’s taken office. And I say that because in his first [Federal Open Market Committee] meeting, which was middle part of June, he led a unanimous vote to keep the benchmark interest rate steady at a somewhat restrictive three and a half to 3.75%.

So, expectations have fundamentally flipped, because earlier this year, markets anticipated one or two rate cuts in 2026. I know that I did. However, projections following that meeting, well, half of FOMC participants now into spate, at least one rate increase by the end of 2026 due to sticky inflation. Also, it’s been somewhat of a quiet revolution, for want of a better word, in Fed operations, and this is something I found very interesting, is that instead of tweaking small parts of monetary policy, well, he’s launched five pretty expansive, what he calls “task forces,” and they’re designed to reshape how the fed functions.

So, three of five I want to touch on. One is the elimination of forward guidance. Now, that means that the historic practice of signaling future interest rate moves to the public and to the markets. He wants to keep the market guessing, so we’re not going to hear much about those at all.

The second one is talking less. So, less communication from the Fed, less speeches. And that’s certainly a sharp departure from Jerome Powers’ lengthier explanation notes. So that’s going away as well. Again, people like myself and a lot of market analysts, we go through those meeting notes, quite frankly, word by word to see what’s changed. They’re gonna have a lot less reading to do.

And finally, total focus on price stability. And now what does that mean? Again, that means they’re going to concentrate wholly on trying to address inflation. And by doing, it kind of distances the central bank from any political pressure to basically artificially stimulate the economy. Bottom line for borrowers, and indeed for people in the real estate industry, is any hope that a new central bank leader would bring some immediate relief via lower borrowing costs, which could lead to, obviously, to lower mortgage rates, that’s gone. With Walsh prioritizing the institutional credibility of the Fed over political convenience, interest rate cuts are off the table. I don’t expect to see any cuts, quite frankly, now until early part of 2027. So for the housing market, this guarantees that structural high rate headwinds that we’re seeing today, they’re going to likely persist through the second half of 2026.

Hartnett

What trends are you seeing specifically in the Boston market that may differ from the national story?

Gardner

Boston’s a market with the widest neighborhood to neighborhood spread in the country in terms of prices. I mean, overall, prices are modestly higher, but it really depends on the neighborhood. Some are booming. Others, they’re cooling pretty fast.

I’d tell brokers that strong, move-in ready inventory in desirable school districts are still moving pretty fast. Still, some say multiple offers, but the long-run affordable story continues to worsen, even though month to month conditions have been softening.

Hartnett

Alright Matthew, to close, when you look at the first half of 2026, what’s been the biggest surprise in the housing market in 2026?

Gardner

In 2026, well, I think that for the better part, I’d say what stuck out to me really is resilience. Inventory is up, sure. But nationally, it’s still 19% lower than we saw in June of 2019.

Sales, monthly sales, nationally, have risen for the past three months. That’s a positive sign, especially given the fact of persistently high mortgage rates. And pricing, nationally, they’ve risen every month so far this year. So we see no systemic market collapse and hopefully a better second half of the year. But that’s going to depend an awful lot on the direction of federal policy, but specifically the direction that the Iranian conflict continues to take.

Hartnett

Alright Matthew, thanks again for your insight. I look forward to catching up to you with our Q3 update.

Gardner

I look forward to it as well, Anne. Thank you.