Looming midterm elections and continuing AI evolution are just two of the reasons a big year is ahead
Looking back at 2025, it was a year that very few pundits correctly forecasted. Economic headwinds kept the Federal Reserve on the sidelines for the first eight months of the year.
Conditions in some markets finally showed improvement by year’s end, while others continued to struggle with a lack of inventory.
There was a government shutdown, which nearly derailed additional rate cuts at the end of the year. The final piece of news to send a shockwave across the industry was reports of a significant increase in credit reporting costs coming in the new year.
It’s hard to imagine 2026 being a wilder ride for the mortgage industry. One executive is optimistic about the year ahead but warns of several major events that will shape the market.
Jonathan Hornik (pictured top), a founding member and owner of the NPLA, said that, when looking at the biggest events of 2026, you need to start near the end of the year.
“The biggest thing happening in 2026 is that you have midterm elections,” Hornik told Mortgage Professional America. “So everything going on in politics and, therefore, a lot in the economy will be impacted by the November election.”
Affordability is a major issue
The Republicans began 2025 with control of both the House and Senate, with President Donald Trump sworn in for the beginning of his second term.
However, some of the headwinds experienced in 2025 have given the Democratic Party some momentum heading into 2026, according to Hornik. One of their biggest platforms is a recurring issue in the housing industry: affordability challenges.
“You have the Democrats who have seemed to have found the lane arguing this affordability concept,” Hornik said. “You had the Democrats sweep in New York City, the New Jersey governorship, and Virginia, so that's going to overlay everything going on.”
Another major moment in 2025 was the government shutdown, which was the longest in US history. While it was finally resolved, it was only pushed ahead until January. Another shutdown could be coming in January, potentially impacting the spring homebuying season if consumers are hesitant amid the uncertainty.
The Federal Reserve will see changes in the first half of 2026. There will likely be a new Fed chair, as Jerome Powell’s term as chair ends in May. The next Fed chair will likely try to lower rates, but Hornik warns that could come at the cost of increased inflation.
“You're going to have a new Fed chair who is going to be aligned with the President's philosophy, lower rates, lower rates, lower rates,” Hornik said. “So that's going to happen. And then you're going to see how the economy, how the public responds to the stickiness of inflation, and how it remains higher.
“I got a lot of friends, people who I work with, and I know that they say they're choosing not to go out to eat now. They’re going to the grocery store, and they're choosing less expensive brands. Now, usually that's not something they do, but they're feeling it, so salaries aren't keeping up with prices, which is something we're going to have to get our hands around.”
Tariffs and AI
While the Supreme Court still has to decide on the legality of President Trump’s tariffs, Hornik thinks the president needs to have a second look at the policy.
“I don't know how elected officials make things affordable,” he said. “Prices are going to go up or come down. Maybe Trump has to revisit his tariff position. It has to be contributing to higher prices, even though the government's collecting more than it's ever collected. It's ultimately paid for by the consumer, and that's what we're feeling. So he's got to figure that out.”
Housing advocates and the Center for American Progress (CAP) warn that expanded tariffs on building materials could add $27 billion annually to construction costs, reducing new builds by 450,000 units over five yearshttps://t.co/wmmQvpIGhQ
— Mortgage Professional America Magazine (@MPAMagazineUS) December 19, 2025
Hornik believes artificial intelligence will also be a big player in some form in 2026. While there are concerns about an AI bubble that could impact the market, there are also the cost and time savings the technology can provide to the mortgage industry.
“There is talk that there's an AI bubble,” he said. “Michael Burry, who called the 2007 housing crisis, bet big against it, made a fortune, and is betting against AI. Basically, he's saying, ‘Yeah, AI is great, but these companies’ values, there's not enough work in AI to support the values.’ Nvidia is a $5 trillion company, maybe it's a $3 trillion company, which is still amazing. That means it's $2 trillion above its value. I think we're going to watch that play out.
“AI is changing everything now. It's amazing. It's changing how I practice law. It may be that many lower-level jobs are eliminated because AI is better and much cheaper. It's amazing what it's doing, even just to the practice of law. I cannot believe what these machines are capable of. I'm blown away by it. I've been practicing law for 30 years now, and I'm like, wow.”
Even with potential headwinds, Hornik is optimistic about 2026, as long as there are no unforeseen major negative events that throw a wrench into the year.
“I'm optimistic about it, provided we don't have some kind of black swan event go on in the world,” Hornik said.
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