Why Compass’s Housing Outlook Reveals Hidden Market Leverage

The U.S. housing market has largely been stuck with skyrocketing prices and stagnant sales, squeezing buyers out for years. Compass, a leading real estate brokerage, predicts that 2026 marks a critical turning point where home prices stabilize while incomes rise faster. This shift isn't about mortgage rate crashes but a rare rebalancing of supply and latent demand. “Affordability improving signals a quietly powerful reset in housing leverage,” says economist Mike Simonsen.

Why Conventional Views Miss the Supply-Demand Constraint Shuffle

Most analysts attribute the frozen market to unaffordable prices and expect a crash if mortgage rates fall too steeply. They overlook that the real constraint isn’t just prices or rates—it's how coupled transactions create a shadow inventory problem. Owners must sell and buy simultaneously, which crippled supply without visible for-sale listings. This creates a locked market dynamic that Compass identifies as latent demand.

This insight challenges the go-to narrative and aligns with system-level constraints explored in articles like why 2024 tech layoffs actually reveal structural leverage failures, where failure to reposition constraints locks growth.

Shadow Demand: The Hidden Driver Shaping Listings and Sales

In 2025, withdrawn listings jumped 47%, mainly owner-occupied homes stuck off market while owners delay moving. Compass estimates about 150,000 such homeowners form shadow demand — a system-level backlog waiting for affordability improvements to trigger movement. This dual transaction necessity sharply limits market liquidity, unlike markets where single home sales dominate.

Unlike competitors betting on steep mortgage rate drops or price plunges, Compass’s approach bets on steady low-6% rates to gradually unlock this supply. This controlled environment keeps prices from overheating and lets income growth catch up, improving affordability in a measured way.

Discounts and Equity: A Compounding Advantage for Buyers

Data from Zillow shows over half of U.S. homes have dropped in value over the past year, but the median gain since purchase remains 67%. Sellers hold ample equity to offer cumulative discounts now reaching $25,000, creating a buyer’s market unseen in years. This gradual price adjustment mechanism compounds leverage on buyers’ budgets without destabilizing the market.

The clearest alternative approach ignores these equity cushions and risks triggering sharp downturns, missing the leverage in seller flexibility. This strategic patience in pricing mirrors the restraint and system awareness seen in why USPS’s January 2026 price hike actually signals operational shift, where calibrated adjustments unlock durable outcomes.

What Operators Should Watch Next

The key shift is unlocking the dual-transaction constraint by transforming shadow demand into active listings without mortgage rate shocks. Operators who see this as a systemic gating factor can predict sales growth and pricing stability well before price data catches up.

Markets and platforms that facilitate chain transactions or smooth interim financing will gain disproportionate advantage. Other industries marked by coupled dependencies, like SaaS customer transitions, show parallels (see why dynamic work charts actually unlock faster org growth).

“Unlocking latent demand by shifting key transaction constraints starts new compounding cycles in frozen markets.” This realignment in the U.S. housing market is a textbook case of strategic leverage at work.

Related Tools & Resources

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Frequently Asked Questions

What is latent demand in the housing market?

Latent demand refers to homeowners who must sell and buy simultaneously, creating a locked market with hidden supply. Compass estimates about 150,000 homeowners form this shadow demand, waiting for affordability improvements to trigger market movement.

Why haven't housing prices crashed despite high mortgage rates?

The market is constrained by coupled transactions rather than just prices or mortgage rates. Compass expects steady low-6% mortgage rates to gradually unlock supply without causing steep price drops, stabilizing the market in 2026.

How much have withdrawn home listings increased recently?

Withdrawn listings increased by 47% in 2025, mainly due to owner-occupied homes delaying market entry because of the dual transaction requirement.

What role does seller equity play in the current housing market?

Sellers hold significant equity, with median gains of 67% since purchase, allowing discounts averaging $25,000. This cushion creates a buyer's market and supports gradual price adjustments without destabilizing the market.

How does Compass's outlook differ from conventional market predictions?

Unlike those expecting crashes from mortgage rate drops, Compass focuses on system constraints like shadow demand and gradual income growth, projecting a market reset around 2026 with stabilized prices and improved affordability.

What are the key factors influencing housing market leverage according to Compass?

Key factors include the dual-transaction constraint causing shadow demand, steady mortgage rates around 6%, rising incomes, and seller equity enabling discounts, all contributing to a strategic market reset.

How can market operators benefit from understanding these housing constraints?

Operators who facilitate chain transactions or provide smooth interim financing can unlock hidden supply and predict sales growth more effectively, gaining an advantage in the evolving market.

What is the significance of the predicted 2026 turning point in housing?

2026 is seen as a critical turning point where home prices stabilize, incomes grow faster, and the latent shadow demand converts into active market listings, signaling a new compounding cycle in housing leverage.