Forecast 2026 (CONT’D FROM PAGE 30)
equity investors, including private equity, remain quite ag- gressive in supplying capital.” Housing Doldrums Speaking of lower interest rates, they can’t come soon enough for a major driver of the nation’s economic activity: the housing sector. “Housing is in a funk,” said Yaros. “Sin- gle-family homebuilders are contending with a growing supply of unsold, completed new homes, as well as great- er competition from the resale market and falling home prices in a rising number of regions.” The high cost of money is not helping matters. “A signif- icant increase in interest rates since the summer of 2022 has increased the monthly payments required from buyers of new or existing homes,” said Petryk. “They have also led to a significant market shortage because families who bought homes three to five-plus years ago are loath to sur- render their sub-3 percent mortgages.” Mortgage rates have an important impact on the con- sumer attitudes that are vital drivers of the economy. While lower short-term rates may be coming from the Federal Reserve, it’s unclear how much effect they will have on the longer-term ones that apply to the funding of new homes. “I do not forecast mortgage rates coming down enough to make a big difference in single-family construction,” said Bill Conerly, Principal of his own consulting firm in Lake Oswego, Oregon (conerlyconsulting.com). Wary builders. Reluctant sellers. Sluggish buyers. It’s all
shock to the system in and around tariffs over the past year, and it is taking some time for many companies to understand their impact,” noted Andrew Petryk, Head of Industrials at Brown, Gibbons Lang & Company, an invest- ment banker (bglco.com). Specifically, companies have responded to China tariffs by sourcing imports from other countries—a move which has also lent succor to the nation’s recent supply chain ills. “Lead times have diminished as companies have found al- ternative or additional suppliers,” said Petryk. “Those that relied on one or two vendors now have three, four or five.” Manufacturers should also benefit from a decline in the cost of money over the coming months, as the Federal Re- serve shifts its focus from fighting inflation to bolstering employment. “We look for inflation to peak at just above 3 percent when 2025 numbers are finalized, and for the Fed to cut interest rates into 2026 until the federal funds rate falls to about 3 percent,” said Yaros. That rate, while much higher than the rates of early 2022, is a considerable im- provement over the 4.3 percent of mid-2025. Declining interest rates, which encourage businesses to launch new initiatives, are also a reflection of looser pockets on the part of the nation’s lenders. “Credit con- ditions have improved significantly for businesses,” said Basu. “Companies with strong balance sheets will find bankers very willing to supply debt. We also know that
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