The German housing market’s weakness is showing up everywhere except in prices
At a Glance
Per the full note , the German housing market is illustrating a peculiar scenario where rising mortgage rates and declining affordability coexist with stubbornly high property prices. Despite a 100 basis point increase in mortgage rates and a resultant 1.5% drop in mortgage loan volumes, house prices in Germany have shown unexpected resilience, with a quarterly increase of 0.3% and a year-on-year rise of 0.6% in Q2 2026. This dynamic underscores a housing market fundamentally constrained by supply shortages that mitigate price corrections, even amidst weakening demand and escalating operational costs for consumers.
Key Takeaways
- 01German house prices rose 0.3% QoQ in Q2 2026 despite rising mortgage rates.
- 021.5% decrease in mortgage lending signals weakening demand in the housing market.
- 03Chronic supply shortages are maintaining elevated housing prices.
- 04The disconnect between prices and affordability complicates housing market forecasts.
Full Analysis
What the desk is arguing
The desk posits that the German housing market's current trajectory, where prices remain elevated despite rising mortgage costs, signals an underlying structural imbalance. As detailed in the research, this anomaly can primarily be attributed to a persistent shortage of housing supply amid cyclical headwinds such as high interest rates and diminishing affordability.
Tellingly, the German Statistical Office reports that while house prices remain 8.2% below their pre-2022 peak, their recovery from a 2024 trough shows a concerning disconnect between the broader economic indicators and housing cost realities. Specifically, mortgage lending volumes fell by over 1.5% in early 2026, indicating that affordability pressures are significantly impacting buyer interest.
Where it sits in our coverage
Our current consensus target for the EUR/USD pair is set at 1.075, with a range from 1.04 to 1.12. Notably, jpmorgan projects a target of 1.10 for the same currency pair by March 2026, while bofa holds a more cautious stance with a 1.04 target.
This desk's assessment indicates a neutral alignment with jpmorgan's position, suggesting that the upward pressures in the housing sector could support the upper bounds of our forecast range. Given the ongoing economic uncertainty, we remain focused on how these evolving housing market dynamics might influence the overall EUR outlook.
How other firms see it
Several firms share a consensus view that the disconnect between supply and demand in the housing market will exert upward pressure on property prices, aligning with jpmorgan's forecasts. Conversely, bofa emphasizes a more pessimistic outlook regarding affordability that could stifle demand further.
Traders should monitor the EUR/USD pair in conjunction with developments in German monetary policy, especially as the ECB adjusts its response to inflation and housing market pressures, keeping in mind the potential impacts from upcoming economic indicators that may highlight shifts in buyer sentiment.
Market Implications
Traders should keep a close eye on the EUR/USD's movement around the 1.075 target as volatility in response to changing mortgage conditions may play a significant role. Upcoming data on housing market trends could act as a catalyst for potential realignments in pricing.
From the original
Articles The German housing market’s weakness is showing up everywhere except in prices Published 09:30 Germany Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Higher mortgage rates are back. Housing affordability is deteriorating. Demand for mortgage
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The German housing market is demonstrating a surprising degree of resilience amid rising interest rates and geopolitical tensions, as outlined in the latest commentary from ING. Despite lingering affordability pressures and weakened lending dynamics, recent data indicates marginal price increases, with house prices rising by 1.4% year-on-year in Q1 2026 after a slight uptick of 0.3% quarter-on-quarter. Per the full note, this stability, seen by some as a silver lining, may mask deeper vulnerabilities that could emerge if economic conditions worsen or if interest rates continue to rise significantly.