2027 home price forecast: flat prices, 7% mortgages, and the tax rules that matter

Most forecasters expect national home prices to be close to flat in 2027, between roughly 0% and 2%, with 30-year mortgage rates staying around 7%. Fannie Mae's October forecast calls for just 0.6% price growth and a 7.5% average mortgage rate in every quarter of 2027.

With inflation above 3%, flat prices mean real (inflation-adjusted) home values keep slipping, as they have for 15 straight months. The Northeast, including the New York metro and New Jersey, is still outperforming the rest of the country.

Where things stand this week

• 30-year fixed mortgage rate: 7.24% (Freddie Mac, October 29), up from 6.17% a year ago
• Federal funds rate: 3.75% to 4.00%, held on October 28 after the Fed's first hike since 2023 in September
• National home prices: up 2.1% year over year (S&P Cotality Case-Shiller, August)

What forecasters expect for 2027

In one month, Fannie Mae cut its 2027 price forecast from 1% to 0.6% and raised its rate forecast from 6.7% to 7.5%, so expect more revisions in both directions.

What's driving the outlook

• Rates jumped. The 30-year rate rose seven weeks in a row to 7.40% in early October, its highest since November 2023, before easing to 7.24%. On a $400,000 loan, principal and interest at 7.24% is about $2,726 a month, roughly $284 more than at last year's 6.17%.
• Inflation forced the Fed's hand. Consumer prices rose 3.7% in the year to September. The Fed raised rates in September for the first time since 2023, then held on October 28 with two officials voting for another hike.
• More homes, fewer buyers. Listings are rising while signed contracts fall. The MBA also expects slower population growth and lower immigration to cut housing demand, and Fannie Mae sees only 4.06 million existing-home sales in 2027.
• A regional split. Chicago (+6.7%) and New York (+6.2%) led Case-Shiller's August gains. Zillow's forecasts show declines in parts of Louisiana, Texas, Florida, Colorado and Northern California.

The climb started before the Fed's September hike and peaked in early October; the late-October dip is small next to the summer starting point.

Every month this year, home prices rose less than consumer prices, so homes lost value in real terms even as sale prices edged up.

New Jersey: higher prices, more listings, slower sales

New Jersey prices are still rising faster than the national average. In September 2026 the statewide median sale price was $550,000, up 2.8% from a year earlier, and single-family homes reached $615,000 (+3.4%).

The balance is shifting toward buyers, though. Homes for sale rose 12.1% to 22,746, pending sales fell 11.3%, and the typical home took 39 days to sell. New Jersey Realtors' affordability index dropped to 74, meaning the median household earns 74% of the income needed to buy the median-priced home at today's rates.

The index has stayed below 100 all year, and it fell as mortgage rates rose from their February low while New Jersey prices kept climbing.

Zillow's mid-2026 forecast still ranked Atlantic City (+3.6%) and Vineland (+2.7%) among the 15 strongest U.S. metros. Most indicators point to New Jersey staying above the national average in 2027, with more room for buyers to negotiate than in 2024 or 2025.

The tax angle for 2026 and 2027

Buyers and owners

• Mortgage interest stays deductible on up to $750,000 of acquisition debt; the OBBBA made that limit permanent.
• Mortgage insurance (PMI and FHA premiums) is deductible again as mortgage interest starting in 2026, phasing out at higher incomes beginning around $100,000 of AGI.
• The SALT cap is $40,400 in 2026 for MAGI up to $505,000. A New Jersey couple paying $14,000 of property tax, $20,000 of state income tax and $30,000 of mortgage interest would itemize $64,000, about double the $32,200 standard deduction. See SALT cap 2026 and PTET.
• Points paid to buy down the rate on a home purchase are generally deductible in the year paid; points on a refinance are spread over the life of the loan.

Sellers

• You can still exclude up to $250,000 of gain ($500,000 married filing jointly) on a main home you owned and lived in for 2 of the last 5 years. Those limits haven't changed since 1997.
• Bills to raise or remove the cap, such as the No Tax on Home Sales Act (H.R. 4327), are not law. Plan on today's limits, and keep receipts for improvements, which reduce your taxable gain.

Investors

• 100% bonus depreciation is permanent for property acquired after January 19, 2025, so a cost segregation study can turn a large share of a building's cost into first-year deductions. See Cost Segregation Coordination, when cost segregation makes sense and the cost segregation savings estimator.
• 1031 exchanges are intact: 45 days to identify a replacement property and 180 days to close. See the 1031 exchange calculator and 1031 exchange timeline and pitfalls.
• Higher rates raise interest expense, which is deductible against rental income. For record-keeping, see bookkeeping tips for real estate investors and the short-term rental tax strategy.

Frequently asked questions

Will home prices fall in 2027?

Not nationally, according to the major forecasts we reviewed, which range from about 0% to +2.2%. After inflation, though, values are likely to keep slipping, and some Sun Belt and Western metros are forecast to decline.

Will mortgage rates drop in 2027?

Fannie Mae expects 7.5% all year, and the MBA expects rates above 7% through 2027. Rates eased to 7.24% in late October, but none of these forecasts shows a return to 6% next year.

Is mortgage insurance tax-deductible for 2026?

Yes. Starting in 2026, PMI and FHA mortgage insurance premiums count as deductible mortgage interest if you itemize, with a phase-out at higher incomes.

How much profit on a home sale is tax-free?

Up to $250,000, or $500,000 for married couples filing jointly, if you owned and lived in the home for 2 of the last 5 years. Proposals to raise the limit have not passed.

Does the higher SALT cap help New Jersey homeowners?

Yes, if you itemize and your MAGI is $505,000 or less, you can deduct up to $40,400 of property and state income taxes in 2026, up from $10,000. Above $505,000 the cap shrinks, reaching $10,000 at about $606,333.

General information, not tax, legal or investment advice. Forecasts and rates as of October 29, 2026.