American voters made it clear that affordability was one of the main drivers that tipped them in favor of putting Democrats in control of Congress in the 2026 midterm elections.
Democratic candidates flipped both the House of Representatives and Senate blue, buoyed by voters who have seen their everyday living costs skyrocket under the second Trump administration—and made it clear they wanted change.
But now the real work of making those campaign promises a reality begins—with housing affordability a top concern. Any solutions Congress might come up with to combat rising housing costs will take time to put into motion and generally inspire bipartisan cooperation, three top economists tell RISMedia.
Before any policies come into play, economists say inflation is a critical risk to mortgage rate stability and, in turn, the health of the housing market.
Inflation, economic headwinds top issues to watch
Getting inflation under control and expanding housing supply without creating outpaced demand could help shape housing affordability, economists say.
October’s hotter-than-expected inflation reading, up 0.4% instead of the 0.3% forecasted month-over-month, makes it highly likely the Federal Reserve will hike rates when it meets in December. In fact, 90% of analysts polled by CME Group anticipate the Fed will hike its target rate by 0.25 percentage points to 4.00% to 4.25%.
“What matters most for buyers and sellers is whether inflation eases and mortgage rates become more affordable and the labor market stays healthy,” says Odeta Kushi, deputy chief economist with First American Financial.
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Another inflationary metric to watch is the U.S. national debt, Kushi notes, which now stands at more than $40 trillion. This will become even more urgent when the current debt limit of $41.1 trillion is reached by May or mid-2027. If there’s a congressional standoff over increasing the debt limit, that could drive inflation—and borrowing costs—higher while creating more financial market volatility, she explained.
But getting inflation under control depends on a lot of moving parts, according to Jake Krimmel, senior economist with Realtor.com®. Under the Trump administration, it’s impossible to pinpoint those moving parts amid a trade war (and tariffs), geopolitical tensions and mixed economic readings.
Krimmel stressed that inflation also erodes purchasing power. “Inflation eats away at paychecks and makes it harder for people to save.”
“The big wild card heading into 2027 is the same one that we’ve been talking about probably since February, which is the effect of the (Iran) War on the longer end of the curve, the Fed’s rate path and the economy more broadly, especially with respect to inflation, consumer confidence and consumer spending,” Krimmel says. “We don’t know what 2027 will bring, but uncertainty is a feature in this market.”
Mischa Fisher, Zillow’s chief economist, points to a simple formula that will bring mortgage rates down to more palatable levels for homebuyers to act.
“We know, generally speaking, that the best way out of this is higher incomes, lower mortgage rates and more supply,” Fisher says.
According to Zillow’s October housing report, the monthly mortgage payment on the typical U.S. home reached $2,004, up 12.8% from a year ago. That means a median-income household would need to spend 34.7% of its income on total housing costs—up from 32.7% a year ago and far beyond the typical 30% benchmark, Zillow reported.
Fisher noted that the Democrats’ sweep of the midterms hasn’t altered Zillow’s housing forecasts, which call for rates to stay in the 7% range, flat-to-lower sales volume compared to 2026 and home values that rise slightly on paper but decline slightly in real terms after adjusting for inflation.
Could Congress pull any meaningful levers for housing?
When the new Congress is sworn in on Jan. 3, they’ll have their work cut out for them to deliver for voters who made affordability a central election motivation. However, with President Donald Trump already pledging to use the power of his pen to veto Democrat-led bills, will any meaningful housing legislation see the light of day?
“When we have this period where Congress is controlled by one party and the executive branch is controlled by the other party, typically, that doesn’t foretell close collaboration on policy,” Fisher says. “But I think we have seen that in the case of housing, there is a bipartisan agreement that there’s room to improve the environment. That’s what we’re watching to see play out.”
Fisher notes that the 21st Century ROAD to Housing Act, which passed earlier this year, offers “a real bipartisan blueprint for how policymakers can work together to specifically improve housing.” The timing couldn’t be more crucial as the gap between Americans’ incomes and affordable housing widens.
Kushi adds that Congress should look at policies that make it “easier, cheaper and faster to build and bring more homes to the market.”
While it’s too early to know what lawmakers have in mind to help ease affordability pressures in the housing market, Krimmel cautions that any government stalemates—a shutdown or lapses in government funding—could be disastrous for the 10-year Treasury yield, which directly impacts mortgage rate movements. A government shutdown can also disrupt economic data collection, making it harder to gauge progress on inflation.
“We already have enough pressure on the 10-year,” Krimmel says. “We don’t need anything else.”
What comes next?
All three economists agree that improving housing affordability involves addressing the supply side, among other action items.
The U.S. has an estimated supply gap of 4.03 million homes, according to Realtor.com. Closing the gap, Krimmel says, means boosting new construction, which needs to be “easier to build.” Lawmakers should “encourage states and localities to adopt more permissive local zoning laws and also streamline that permitting process,” Krimmel says, cautioning that it will take time to see any gains.
For now, Realtors® should track local inventory and price trends to help guide their clients more effectively. Fisher notes that affordability-related softness and price pressures will persist in parts of the Mountain West and Sun Belt, while supply-constrained coastal markets where new building isn’t as robust face upward pressure.
Existing-home inventory is still being suppressed by the mortgage lock-in effect, as owners may be reluctant to sell and give up their pandemic-era low rates. More realistic pricing from sellers can help listings go under contract and give buyers more negotiating power. But a more buyer-friendly market doesn’t necessarily mean homes are affordable to more buyers, Krimmel says.
Only time will tell if income growth can keep up with housing costs—and if Congress can act quickly enough to start meaningfully improving affordability to help ease Americans’ financial strain.
