BiggerPockets Real Estate Podcast

Episode: 2026 Mortgage Rate Predictions: This “X Factor” Could Change Everything

Host: Dave Meyer
Date: December 1, 2025

Episode Overview

In this prediction-driven episode, Dave Meyer kicks off the 2026 real estate forecasting season with an in-depth look at the most consequential variable for the housing market: mortgage rates. Drawing on recent trends, economic mechanics, and major external forces, Dave not only presents his forecast for 2026 mortgage rates but also highlights other expert opinions and unpacks the so-called "X Factor" that could unexpectedly reshape the market in the coming year.

Key Topics & Discussion Points

1. Why Mortgage Rates Matter Most (00:00–06:55)

• Dave emphasizes mortgage rates as the central driver of housing market dynamics and real estate investment opportunities.
  • Affordability, not the Federal Reserve alone, is decisive: “My theory about the housing market ... is that affordability is the key to everything. And mortgage rates are the most important variable in affordability.” (01:55)
• The U.S. is experiencing a “slow” housing market, with transaction volumes 30% below the average due to an “affordability wall.”
  • Other factors (labor market, tariffs, institutional investors) matter, but none as much as rates.
• Context for 2025: Mortgage rates started around 7.2% and declined toward 6.2–6.4%—in line with Dave’s prior prediction.
• Contrary to many influencers/forecasters, Dave was skeptical that rates would drop into the 5% range in 2025.

2. How Mortgage Rates Are Set: The Math Behind the Market (06:55–11:30)

• Mortgage rates are a function of:
  1. The 10-year U.S. Treasury yield
  2. The risk “spread” (or risk premium) over that yield
• Explained:
  • “Banks are not going to lend to you at the same rate they lend to the U.S. Government ... the average U.S. homeowner is just riskier than the United States government.” (09:18)
  • Historically, the average spread is about 2%; if Treasuries are at 4%, add a 2% spread, you get a 6% mortgage rate.
• 2025: Minor spread narrowing and falling yields brought rates down—a fact supported by data.

3. The Fed's Role: Less Direct Than Perceived (11:30–12:40)

• The Federal Reserve’s activity (federal funds rate) does influence mortgage rates but less directly than most believe.
  • Fed moves can result in lower bond yields or spreads, but this chain is long and indirect.
  • “The federal fund rate is just one of many complicated factors like inflation, the labor market, supply and demand in the [mortgage-backed securities] market ... all those things go into what bond yields are and what the spread is going to be.” (10:55)

4. 2026 Rate Prediction: Scenarios & Rationale (12:40–18:45)

• Main influencers on Treasury yields: Inflation fears and recession risk
  • “When there is a lot of risk of inflation, the bond yields tend to go up... The other major thing that moves bond yields is recession risk.” (13:12–14:20)
• Economic context for prediction:
  • As of Fall 2025:
    • Inflation recently ticked up to 3.1%.
    • Early labor market signs of weakness (ADP reports 50k lost jobs in October).
    • Data shortages due to a government shutdown make forecasting harder.
  • The “push-pull” of inflation and recession risk keeps mortgage rates rangebound.
    • “That sort of means that we are stuck right now ... and I think that's why it's unlikely bond yields and mortgage rates are going to move significantly, at least for the next few months.” (15:50)

Dave’s Forecast:

• 2026 Mortgage Rate Range: 5.6% to 6.6%, with volatility expected.
  • “My base case for mortgage rates in 2026 is for them to stay in a range of 5.6 and 6.6%. And I do expect it to be volatile.” (17:19)
• Likely average: 5.8% to 6.2%
  • “If you ask me to pick an average for the whole year, I'd just say it's close to 6%.” (17:48)

Industry Predictions:

• Fannie Mae: ~5.9% for 2026
• Mortgage Bankers Association: 6.4%
• National Association of Realtors: “Near 6%”
  • “Most forecasters agree things aren’t going to change that much.” (18:33)

Dave’s Confidence Level:

• “Mildly confident”—owing to a lack of late-2025 data and the presence of a destabilizing “X factor.”

5. The “X Factor”: Quantitative Easing (18:45–28:10)

What is Quantitative Easing (QE)?

• QE is when the Federal Reserve injects liquidity into financial markets by buying U.S. Treasuries or mortgage-backed securities—often referred to (somewhat inaccurately) as "money printing."
  • “What they actually do is they go out and they buy U.S. Treasuries, those bonds that we were talking about before, or they even buy mortgage-backed securities ... and what money do they use ... they literally just create it out of thin air.” (24:02–24:45)

Why QE Matters for Mortgage Rates:

• If the Fed buys mortgage-backed securities, it raises demand, lowers yields, and pushes mortgage rates down—potentially even into the 4% range.
  • “If they do it aggressively, we could definitely see rates lower than my range ... we could even see rates into the 4% if they were to do this. And that would be a huge shift.” (25:15)
• Probability of QE: Wall Street analysts see a ~50% chance in 2026, especially with ongoing labor market weakening and political pressure (notably from President Trump, who takes office and may appoint a new Fed Chair in May 2026).

Political & Economic Triggers:

• A new Fed Chair (post-Powell) could be more willing to use QE.
• President Trump has vocalized support for lower mortgage rates and longer-term mortgages (e.g., 50-year).
• Labor market issues, particularly if AI-induced displacement escalates, could force the Fed’s hand.

Caution:

• Dave is cautious about QE's inflationary risks, citing the asset bubbles and price spikes post-2020.
  • “I believe that quantitative easing should only be used in true emergencies ... it comes with serious risk of inflation like we saw in ’21 and ’22 and asset bubbles.” (25:53)
• Base-case prediction assumes QE does not occur—but acknowledges increasing likelihood.

Key Quote:

“This, even though I know it sounds esoteric and nuanced, would have a bigger impact on the housing market than any other thing in 2026. It could fundamentally change the direction of the market in meaningful ways.” (27:22)

Notable Quotes & Memorable Moments

• On the “affordability wall”:

  • “The housing market is slow right now. We’re going to have only about four million transactions in 2025, which ... is actually 30% below the average.” (02:40)

• On ignoring popular narratives:

  • “Just like I didn’t buy that idea in 2023 or in 2024 ... I am not focused on the Fed. I am focused on two other things when I look at mortgage rates. Number one is the yield on 10 year US Treasuries and number two is something called the mortgage [spread].” (04:45)

• On future uncertainty:

  • “This year I don’t feel super confident. I would say I am mildly confident ... so much is changing right now. And to go the last two months without any new information is pretty big. It really makes forecasting hard.” (18:56)

• On quantitative easing as a wild card:

  • “The big X factor is the prospect of something called quantitative easing. Yes, that is right. The Fed could feasibly bring back its one tool that could really bring down mortgage rates in 2026.” (23:35)

• On the potential market impact of QE:

  • “If they do it aggressively, we could definitely see rates lower than my range ... who knows, we could even see rates into the 4% if they were to do this. And that would be a huge shift.” (25:15)

Timestamps for Key Segments

| Time | Segment | |------------|----------------------------------------------------------| | 00:00–06:55| Why mortgage rates are the #1 variable for 2026 housing | | 06:55–11:30| How mortgage rates are set: yields & spreads | | 11:30–12:40| The Federal Reserve’s indirect influence | | 12:40–18:45| Dave’s 2026 mortgage rate prediction & expert forecasts | | 18:45–23:35| The “X Factor” introduction – What could change the game | | 23:35–28:10| Detailed dive into quantitative easing & its implications|

Conclusion

Dave Meyer’s 2026 mortgage rate forecast calls for rates to hover between 5.6% and 6.6%, with an average near 6%—unless the “X factor” (a return of Fed-driven quantitative easing) materializes. If QE resumes, all bets are off, and rates could plunge, dramatically altering the real estate investment landscape. Dave urges listeners to keep a close watch on economic data, labor market developments, and the political environment, highlighting how layered and interconnected these variables are for anyone planning their financial future in real estate for 2026.

Next Up

Stay tuned for Dave's follow-up episode with predictions on price appreciation, rent growth, and the wider 2026 housing market outlook.