Economist EJ Antoni on US Economic Outlook for 2026: Risks and Housing Affordability

Bullish Outlook for 2026

• 📈 EJ Antoni expresses a bullish outlook for the US economy in 2026, citing positive developments in tax policy and regulatory reform.
• 💡 The reduction of regulations, especially compared to the previous administration, is highlighted as a significant positive step.
• 🚀 Pro-energy policies are expected to lower energy prices, which will have a ripple effect throughout the economy.

Federal Reserve Policy as a Major Risk

• ⚠️ The biggest single risk to the US economy in 2026 is identified as Federal Reserve policy, particularly if Jerome Powell makes further mistakes.
• 🎯 Mistakes mentioned include keeping rates too low for too long and botching the management of the Fed's balance sheet.
• 🔑 The appointment of a new Fed chair is seen as crucial, with a preference for individuals who favor rate cuts.

Challenges in Real-World Interest Rates

• 📊 While the Fed may cut rates, real-world interest rates like those on mortgages and the 10-year Treasury have increased instead of decreased.
• 🛠️ The next Fed chair must understand that Fed actions don't always translate directly to desired outcomes in real-world rates and must be prepared to use various monetary tools.

Housing Affordability Crisis

• 🏠 A new study indicates that over 75% of US homes are unaffordable for typical households, with many spending more than 30% of their income on housing.
• 💰 The high price of homes, not just interest rates, is the primary driver of unaffordability, making it difficult to afford homes even with lower interest rates.
• 📈 Increasing housing supply is identified as a critical solution to the affordability problem.

Impact of Immigration on Housing Supply

• 💬 Antoni suggests that reducing the number of illegal immigrants could alleviate demand pressure on housing.
• 🏗️ He questions the argument that illegal immigrants contribute to housing construction, noting a lack of corresponding boom in residential construction during periods of increased illegal immigration.