2026 US Housing Market Forecast: Will the Market Find Its Footing?Will 2026 be the year buyers stop
waiting? Forecasters are split, predicting anywhere from 1.7%1 to
14%2 growth in home sales. That 12-point gap reveals the central
question facing the housing market: how much will slightly lower mortgage rates
and slowly eroding lock-in effects actually unlock pent-up demand?
Nearly every major forecaster agrees the
market will be more active than 2025. But beyond that consensus, predictions
diverge sharply on pace and scale. The National Association of Realtors (NAR)
expects robust 14% sales growth. Realtor.com sees a modest 1.7% bump. Both
could be right for different markets and price points.
For anyone planning to buy, sell, or
simply understand their home equity position in 2026, these diverging forecasts
matter less than the underlying fundamentals. Mortgage rates should settle
slightly lower. Inventory will improve modestly. Prices will continue rising,
though more slowly than recent years. The market is thawing. More importantly,
the housing market appears to be returning to the pace and rhythm of more
normal conditions after the artificial volatility of the pandemic era.
The 2025 Context: Why the Market Stayed Frozen
The 2025 housing market disappointed.
Mortgage rates remained stubbornly above 6.5%, suppressing demand and keeping
transaction volumes near historic lows.8 As of mid-2025, more than
80% of U.S. homeowners hold mortgage rates below 6%, reinforcing the lock-in
effect that has kept many would-be sellers on the sidelines.³
Affordability challenges reached acute
levels. The typical first-time buyer aged to 40 years old4,
reflecting simple math that monthly payments at elevated rates and prices
pushed homeownership out of reach for younger buyers. The market did not crash
but did not heal either, with overall transaction volume remaining constrained.
2026 Predictions: Where Forecasters Agree and Disagree
Mortgage Rates: Consensus on Modest Improvement
Forecasters agree broadly on mortgage
rate trajectories. Expectations cluster tightly in the 6.0% to 6.4% range,
representing modest but meaningful improvement from 2025 levels.
2026 Mortgage Rate Forecasts
|
Source |
2026
Rate Forecast |
|
NAR2 |
6.0% |
|
Fannie Mae7 |
5.9% (EOY) |
|
MBA6 |
6 - 6.5% |
|
Zillow5 |
~6.0% |
|
Realtor.com1 |
6.3% |
This narrow range suggests forecasters
see similar Federal Reserve policy paths ahead. While rates in the low 6% range
remain elevated by recent standards, they represent improvement that could make
a difference for buyers.
The more important question is whether
this modest decline triggers meaningful market activity. A drop from 7% to 6.5%
means little if buyers continue waiting for 5% or sellers remain locked in at
3%. The National Association of Realtors estimates that a drop to 6% could
unlock 5.5 million additional buyers, including 1.6 million renters.2
But the forecasters’ disagreements on sales volume reveal uncertainty about how
big an impact lower rates will have.
Existing Home Sales: The Uncertainty Factor
Existing home sales projections for 2026
show far more variation than mortgage rate predictions, reflecting different
assumptions about how quickly the market thaws.
2026 Existing Home Sales Forecasts
|
Source |
Sales
Volume |
YoY
Growth |
|
NAR8 |
4.674M |
+14% |
|
Fannie Mae7 |
4.373M |
+7.8% |
|
MBA6 |
4.367M |
+6.3% |
|
Zillow5 |
4.26M |
+4.3% |
|
Realtor.com1 |
4.13M |
+1.7% |
This wide range from 1.7% to 14% growth
reveals genuine uncertainty about buyer and seller behavior. Will homeowners
with 3% mortgages finally accept that rates around 6% represent the new
baseline? Will life changes like job relocations, family adjustments, or
divorces finally outweigh the financial cost of giving up low rates?
The trajectory depends on several key
factors working together. The lock-in effect must continue eroding. As long as
a significant percentage of homeowners hold mortgages well below current rates,
many will choose to stay put, but this effect will continue to decline as more
homeowners reach the threshold where life circumstances outweigh rate
considerations.
Buyers also need to shift psychologically
from waiting for rates to return to the artificial levels of 2020 toward
accepting 6% as normal. Many prospective buyers spent the past two years
waiting for dramatic rate declines. However, with 6%-7% now normalized and
rates expected to drop further next year, buyers may decide to reenter the
market.
Additionally, employment and income
stability provide the foundation for both buyer confidence and seller
flexibility. Job gains and wage growth give more buyers the financial capacity
to proceed with purchases despite elevated rates. Several forecasters expect
slowing price growth combined with continued income gains to gradually improve
affordability in 2026.1 Any weakening in employment conditions would
likely push sales toward the lower end of forecasts, while sustained strength
supports higher volumes.
Even modest changes in interest rates or
consumer psychology could swing actual sales significantly within this forecast
range. The wide spread reflects genuine uncertainty about these behavioral
factors rather than disagreement about underlying economic fundamentals.
Home Prices: Continued Appreciation Expected
All major forecasters predict continued
home price appreciation in 2026, though projections cluster in a relatively
narrow band between 0.5% and 4% growth.
2026 Home Price Growth Forecasts
|
Source |
Price
Growth |
Estimated
2026 Price* |
|
NAR2 |
+4.0% |
~$427,000 |
|
Realtor.com1 |
+2.2% |
~$420,000 |
|
Fannie Mae7 |
+1.3% |
~$416,000 |
|
Zillow5 |
+1.2% |
~$416,000 |
|
MBA6 |
+0.5% |
~$413,000 |
*Based on Q2 2025 median price of
$410,800
The relatively narrow range of price
forecasts—compared with wider variation in sales volume projections—suggests
greater agreement on price direction than on transaction activity. While sales
volumes remain uncertain, supply-demand fundamentals continue to support
prices.
Housing inventory remains below levels
associated with a balanced market, reflecting years of underbuilding relative
to household formation. These supply constraints continue to support prices
even as transaction volumes remain lower.
Existing homeowners are generally in
strong financial positions, with substantial equity accumulated in recent
years. This limits forced sales and allows many move-up buyers to deploy equity
toward down payments, helping sustain prices, particularly in higher-priced
segments.
Price growth expectations for 2026 are
modest compared with recent years. The projected appreciation reflects a return
to more historically typical growth rates rather than the elevated gains seen
during the pandemic period.
What This Means for Buyers
For prospective homebuyers, 2026 presents
a complex environment requiring careful evaluation of affordability constraints
against the reality that waiting may not yield significantly better conditions.
Accepting the New Rate Reality
Mortgage rates are expected to settle in
the 6.0% to 6.4% range in 2026, representing modest improvement from 2025 but
remaining well above the unusually low levels seen during the pandemic. Rates
below 3% were driven by emergency monetary policy and are unlikely to return in
the near term. Buyers waiting for a drop to 4% or 5% may need to recalibrate
expectations, as current forecasts suggest low-to-mid-6% rates are closer to a
new baseline. Planning purchases around these levels provides a more realistic framework,
with refinancing remaining an option if rates fall further in later years.
Improved Supply and Buyer Leverage
While housing supply remains below
long-term balanced levels, inventory has improved compared with recent years,
giving buyers more options and greater flexibility.1 Days on market
have lengthened, bidding wars are less common, and sellers are generally more
open to contingencies, repairs, and concessions.5 Competition
persists for well-priced homes in desirable locations—particularly during
spring and summer—but overall market conditions are less frenetic than during
the pandemic surge.
Pricing and Competition Dynamics
Home prices are still expected to rise
modestly, with forecasts ranging from 0.5% to 4% growth nationally. This means
waiting may not lead to meaningfully lower prices, even as rates improve
slightly. However, slower appreciation reduces urgency and allows buyers to be
more selective. Homes priced appropriately should continue to sell, but
overpricing carries greater risk as buyers gain more alternatives. The market
increasingly rewards patience, preparation, and informed offer strategies
rather than speed alone.
First-Time Buyer Challenges
First-time buyers continue to face the
steepest hurdles in 2026. The median age of a first-time buyer has risen to 40
years old4, underscoring how affordability pressures, higher down
payment requirements, and elevated mortgage rates have delayed entry into
homeownership for many households. Even with modest improvements in rates and
inventory, upfront costs and monthly payments remain significant barriers,
particularly for buyers without existing equity.
That said, conditions may ease slightly
compared with 2025. Slower price growth and incremental rate declines reduce
some pressure, while increased inventory offers more choice and less
competition than in recent years. Low-down-payment programs, co-buying
arrangements with family or friends, and targeting more affordable submarkets
can help bridge the gap. While first-time buyers still face meaningful
challenges, the 2026 market offers greater flexibility and less urgency than
the peak pandemic period, making preparation and strategy more important than
speed.
What This Means for Sellers
For homeowners considering a sale in
2026, market conditions remain generally favorable—but seller leverage is no
longer uniform. Outcomes increasingly depend on location, price tier, and
property condition. Well-priced, move-in-ready homes in desirable areas
continue to attract strong interest, while properties that are overpriced or
require significant work face longer marketing times and greater buyer
resistance.
Evaluating the Mortgage Rate Trade-Off
The lock-in effect continues to influence
seller decisions, but the calculation goes beyond comparing a 3% mortgage to a
new loan at 6% or higher. Many homeowners now hold substantial equity that can
offset higher borrowing costs, particularly for those downsizing, relocating to
more affordable markets, or reducing overall housing expenses. Life events—job
changes, family needs, or retirement—are increasingly outweighing rate
considerations as sellers reassess priorities in a market where rates in the low-to-mid
6% range appear more durable.
Pricing Strategy
Accurate pricing is critical. Overpricing
increases the risk of extended days on market, which can stigmatize listings
and lead to eventual price reductions. Buyers in 2026 are more patient and
better informed, with more alternatives available than in recent years. Sellers
should rely on recent comparable sales and current local conditions rather than
peak pandemic benchmarks. Homes priced correctly from the outset are more
likely to sell efficiently and closer to asking price.
Concessions Are Becoming a Normal Tool
As affordability remains stretched for
many buyers, seller concessions are playing a larger role in successful
transactions. Closing cost credits, rate buydowns, and repair allowances are
increasingly used to bridge gaps without cutting headline prices. These tools
allow sellers to remain competitive while helping buyers manage monthly
payments and upfront costs. In many markets, concessions are not a sign of
weakness but a practical response to current financing realities.
Preparation and Presentation Are Decisive
With inventory higher than in recent
years, presentation matters again. Homes in excellent condition command
stronger interest and pricing premiums, while properties needing repairs are
more likely to linger. Minor improvements—fresh paint, deferred maintenance,
professional cleaning, and quality photography—can materially affect outcomes.
Pre-listing inspections can also reduce surprises during escrow and improve
buyer confidence. In a more balanced market, preparation often determines
whether a home sells quickly or requires multiple price adjustments.
What This Means for Renters
For households choosing—or needing—to
rent in 2026, the decision remains largely pragmatic. While rent growth has
slowed in many markets, homeownership costs remain elevated due to prices and
mortgage rates in the low-to-mid 6% range. In much of the country, renting
continues to offer lower monthly costs and greater flexibility, particularly
for households without substantial savings or with uncertain time horizons.
The rent-versus-buy decision in 2026
depends heavily on location, finances, and length of stay. Modest home price
appreciation suggests waiting may not result in lower purchase prices, but
renting can still make sense for those prioritizing mobility or avoiding
financial overextension. Ownership builds equity and stabilizes long-term
housing costs, while renting preserves optionality in a market still adjusting
to higher rates.
For renters who aspire to buy, 2026 may
be best viewed as a preparation period rather than a holding pattern.
Strengthening credit, building savings, reducing debt, and monitoring target
markets can materially improve future buying power. For others, continuing to
rent remains a rational choice, not a failure to “time the market.” In a market
defined by normalization rather than disruption, aligning housing decisions
with personal circumstances matters more than forcing a transition to
ownership.
Conclusion: A Market in Transition
The 2026 housing market is defined less
by dramatic change than by gradual normalization. Mortgage rates are expected
to remain in the low-to-mid 6% range, sales activity may improve modestly, and
home prices are projected to rise at a slower, more historically typical pace.
The volatility of the pandemic era has faded, replaced by a market driven more
by income growth, supply constraints, and household needs.
For buyers, sellers, and renters, success
in 2026 depends less on timing the market and more on adapting to it. Buyers
gain more choice and negotiating room but face ongoing affordability
challenges. Sellers still benefit from limited supply, but pricing discipline
and preparation matter more. Renters continue to balance flexibility against
long-term ownership goals. With rates unlikely to return to pandemic lows and
prices expected to hold, the market rewards realistic expectations, financial
readiness, and decisions grounded in personal circumstances rather than
predictions of dramatic shifts.
References
1. Realtor.com
https://www.realtor.com/news/trends/housing-forecast-2026-mortgage-rates-affordability-improves/
2. NAR Real Estate Forecast
Summit
https://www.nar.realtor/events/nar-real-estate-forecast-summit
3. RealtorMag
https://www.realtor.com/news/trends/mortgage-rates-below-6-percent-august-2025/
4. National Association of
Realtors (NAR). (2025, November). First-Time Home Buyer Share Falls to Historic
Low of 21%, Median Age Rises to 40. https://www.nar.realtor/newsroom/first-time-home-buyer-share-falls-to-historic-low-of-21-median-age-rises-to-40
5. Zillow
https://www.zillow.com/research/2026-housing-predictions-35800/
6. MBA
https://www.mba.org/news-and-research/newsroom/news/2025/10/19/mba-forecast--total-single-family-mortgage-originations-to-increase-8-percent-to--2.2-trillion-in-2026
7. FannieMae
https://www.fanniemae.com/media/56451/display
8. NAR
https://www.nar.realtor/sites/default/files/2025-11/ehs-10-2025-summary-2025-11-20.pdf
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