Stocks were little changed as key inflation data monitored by the Federal Reserve continued to slow

The biggest challenge facing the housing market is not going away anytime soon.

Bank of America economists warned that the housing market will remain “stuck in the mud, and unlikely to become unstable” until 2026, as the supply of homes for sale remains near record lows.

The so-called “lockup” effect of homeowners who took out very cheap mortgages when rates were low during the pandemic has caused homeowners to stay put.

The investment bank believes the effects of this could last for 6 to 8 years, leading to lower housing activity and, consequently, lower residential investment, which feeds into the GDP calculation.

High interest rates have had a significant impact on home ownership.

Mortgage rates remain hovering around 7% despite a recent decline in borrowing costs, keeping supply low and pushing prices higher for homes changing hands.

Home prices hit a new record in April, though annual growth slowed from the previous month, according to Latest data available From Case Shiller. Bank of America expects home prices to grow by 4.5% this year, 5.0% next year and 0.5% in 2026.

“House prices have already exceeded their long-term fundamental value based on disposable income,” Michael Gapen, an economist at Bank of America, wrote in a note to clients on Friday.

“Second, our outlook for the economy calls for continued normalization as the effects of the pandemic move into the rearview mirror. The structural shift in housing demand that has pushed up house prices should fade over time. However, we believe it is unlikely that house prices will fall a lot.”