Chapter 1
Economy
U.S. Real Estate Market Outlook Midyear Review 2026
5 Minute Read
5 Minute Read
Midyear Outlook
- The U.S./Iran conflict’s impact on global commodity prices in H1 presents certain risks to our economic outlook for the rest of this year. Energy prices appeared to be normalizing after a temporary cease fire, but a resumption of military action suggests volatility lies ahead.
- Price stability has been disrupted by the U.S./Iran conflict. Headline inflation rose above 4% by late Q2, driven by surging fuel costs. Our baseline forecast is for inflation to ease to 3.6% by Q4. As of early July, Brent crude futures have crept back above $80 per barrel. Oil prices could return to the $100 per barrel range where they traded in May should the Strait of Hormuz remain highly restricted for an extended period. This outcome would lift our inflation outlook for the remainder of the year.
- Despite global uncertainty, U.S. economic performance leads most advanced OECD economies. GDP growth is projected to average 2.1% this year, on par with that of 2025. Despite concerns about its sustainability, the AI investment boom will be a key growth driver for the year. In 2025, tech investment accounted for half a percentage point of GDP growth.
- Consumer spending—the largest component of the U.S. economy—has been resilient but could be impacted by persistently high gasoline prices. Energy prices could face further volatility as Strait of Hormuz cargo traffic remains highly restricted amid rising U.S. and Iranian tensions. Meanwhile, job growth is poised to accelerate to 0.3% by year-end, providing minor support to U.S. consumers.
- Since the U.S./Iran conflict began, the 10-year Treasury yield has been rapidly increasing, exceeding 4.7% in late July. We expect the yield to end the year at 4.3%. With inflation elevated, we expect the Federal Reserve to keep interest rates steady, while monitoring how quickly energy markets either normalize or tighten based on the extremely fluid geopolitical situation.
Figure 1: CBRE U.S. Economic House View
Key Updates to Forecast
- As the year began, an increase in tariffs was putting upward pressure on goods prices, but the overall inflation rate was expected to average 2.5% for the year. Now, destabilized global energy markets have increased our annual inflation forecast to 3.6%.
- Prior to the U.S./Iran conflict, CBRE expected the Fed to make two rate cuts this year, in line with the consensus view. But with inflation and labor market data now running hotter, we expect the Fed will keep rates steady for the remainder of the year and that the 10-year Treasury yield will be in the low 4% range.
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