2026 Housing Market Outlook Overview
The 2026 housing market is expected to stabilize with flat home prices, modest sales growth, and improving affordability amidst a divided economic landscape.
Key Factors Influencing Home Prices
Home prices are forecasted to remain flat nationally, with a slight increase of 0.5% expected.
- National home prices may range from –3.6% to +4.6%.
- Many metro areas are already experiencing year-over-year price declines.
- Rising inventory and affordability challenges limit price increases.
- Strong household balance sheets prevent significant downside risks.
Home Sales Predictions for 2026
Home sales are anticipated to rise modestly, marking the strongest momentum since the pandemic.
- Existing home sales projected to increase by approximately 5%, from 4.1 million to ~4.25 million.
- With favorable macroeconomic conditions, sales could reach 4.5 million, resulting in a 10% growth rate.
- Luxury home sales are expected to outperform entry-level properties.
Inventory Growth Expectations
Inventory levels are forecasted to grow by about 10% in 2026.
- Supply is increasing in the Northeast and Midwest, while growth in the Sun Belt is moderating.
- Sufficient inventory is expected to support home sales and prevent significant price increases.
Mortgage Rate Forecast for 2026
Mortgage rates are expected to fluctuate between 5.9% and 6.9%, averaging around 6.4%.
- Rising unemployment could lower rates into the high-5s.
- A stronger economy or higher inflation could push rates back toward 7%.
Improving Housing Affordability Trends
Housing affordability is gradually improving after reaching its worst level in nearly 40 years.
- Homes remain about 25% above traditional affordability levels based on price-to-income ratios.
- Improvement is expected through flat home prices, rising incomes (4% annual growth), and gradually falling mortgage rates.
The Impact of American Mobility on Housing
American mobility has been constrained, affecting migration patterns and inventory.
- The "Great Stay" phenomenon has created regional imbalances in housing supply.
- Nearly 20% of mortgages now carry rates above 6%, increasing the pool of potential sellers.
Economic Conditions Affecting Housing Market
The U.S. economy is experiencing a K-shaped recovery, with divergent conditions across demographics and regions.
- Older, affluent households are gaining wealth, while younger, lower-income borrowers face financial pressures.
- Sun Belt markets are facing inventory saturation, while Northeast and Midwest metros are experiencing inventory shortages.
Notable Local Markets to Watch
Several local markets are poised for unique trends in 2026.
- Florida is expected to rebound in transaction volume post-hurricanes.
- The Bay Area is seeing an AI-driven boom, while Dallas-Fort Worth offers opportunities for first-time buyers.
- Washington D.C. faces uncertainty due to federal workforce reductions impacting local economy.
Rising Foreclosure Rates and Market Normalization
Foreclosure rates are expected to rise in 2026, but remain low compared to historical levels, indicating a normalization of the housing market.
- Projected completed foreclosures for 2025 are around 80,000, significantly lower than nearly 1 million in 2010 during the housing crisis.
- The increase in foreclosures is a sign of returning to typical levels after the pandemic's forbearance programs.
- Current homeowners generally have substantial equity, and lending standards are tight, reducing the risk of a crisis similar to 2008.
- A modest increase in foreclosures may help balance the housing supply, keeping price pressures in check.
Unlocking American Mobility Post-Pandemic
The housing market is expected to see increased mobility in 2026 as conditions shift from the pandemic-induced "Great Stay."
- The pace of relocation fell by 30% from 2021 to 2023, but surveys indicate that the desire to move has increased from 10% to 25% since 2022.
- Mortgage rate lock-in is fading, with nearly 20% of mortgages above 6%, allowing homeowners to move more freely.
- Northern markets face tight inventory, while Sun Belt markets have excess supply, creating distinct opportunities for buyers and sellers.
- 2026 is anticipated to mark the beginning of a more normal housing market, with increased mobility.
Regional Market Imbalances and Opportunities
The housing market in 2026 will be characterized by significant regional imbalances, creating unique opportunities for buyers and sellers.
- Northern metros like Chicago and Boston have extremely tight inventory, with Connecticut seeing 60% fewer homes on the market than in 2019.
- Sun Belt markets, such as Tampa and Texas, have seen inventory swell, leading to longer selling times and price pressures.
- Buyers in northern markets face limited selection, while those in the Sun Belt have more choices and negotiating power.
- As mobility increases, inventory is expected to grow in northern markets while slowing in the Sun Belt.
Job Market Dynamics and Housing Mobility
The job market's performance will significantly influence housing mobility and market dynamics in 2026.
- Job anxiety remains a concern, with hiring and quits rates falling to levels typically associated with recessions, despite low unemployment at 4.3%.
- A decline in the labor market could hinder mobility, as workers are hesitant to change jobs and homes.
- The hiring rate is currently at 3.2%, indicating a scarcity of open jobs, which contributes to "job hugging" behavior among workers.
- An uptick in hiring or quits rates could signal improved confidence and increased housing mobility.
Work From Home Trends and Housing Demand
The work-from-home trend has stabilized, positively impacting housing demand and mobility in 2026.
- Over 30% of workdays in major U.S. cities are still done from home, indicating a lasting shift in work patterns.
- The hybrid work model supports demand in exurban communities, making longer commutes more acceptable.
- Stability in remote work allows buyers and sellers to make decisions without fear of sudden changes in work policies.
- Larger metros are more insulated from return-to-office pressures compared to smaller cities.
Immigration Policy Impact on Housing Demand
Changes in immigration policy are affecting housing demand, particularly in markets with high immigrant homebuyer shares.
- Some markets, like Stockton and Trenton, see over 15% of purchase mortgages going to non-permanent residents, which could soften demand if restrictions persist.
- In contrast, markets like New York and Houston have a lower share of immigrant buyers, making the impact of immigration policy less significant.
- Overall, restricted immigration may have a modest impact on home sales, but high-exposure metros could face meaningful headwinds.
Economic Division and Housing Market Dynamics
The housing market in 2026 will reflect a divided economy, with contrasting conditions affecting buyers and sellers.
- "Shadow inventory" from frustrated sellers could flood the market, while "shadow demand" from sidelined buyers may absorb supply if conditions improve.
- By late 2025, nearly 60% of new listings were withdrawn, indicating potential future competition in the market.
- Purchase mortgage applications have increased by 15-25% year-over-year, suggesting a buildup of demand despite affordability challenges.
- The balance between shadow inventory and demand will shape market activity in 2026.
Mortgage Rate Outlook and Economic Drivers
Mortgage rates are expected to remain elevated but may see slight improvements in 2026 due to economic conditions.
- The forecast range for 30-year fixed mortgage rates is between 5.9% and 6.9%, averaging around 6.4%.
- Factors supporting this outlook include a softening job market, narrowing mortgage spreads, and persistent inflation.
- A rapid deterioration in economic data could push rates lower, while stronger employment numbers or inflation could lead to higher rates.
- The mortgage rate environment will significantly influence housing demand and affordability.
Inventory Growth and Supply Dynamics
Housing inventory is projected to grow modestly in 2026, impacting transaction volume and home prices.
- Inventory is expected to rise by approximately 10-15% in 2026, improving selection for buyers but not leading to sharp surges.
- Seasonal patterns will remain, with inventory peaking above 1 million active listings for the first time since 2017.
- A slowdown in demand or increased investor selling could lead to larger inventory increases, while a strong economy could tighten supply.
- The balance of inventory growth will shape home price trends in the coming year.
Home Price Trends and Forecasts
Home prices are expected to remain flat in 2026, influenced by inventory levels and market dynamics.
- The baseline forecast calls for a 0.5% increase in home prices, with a plausible range from slight declines to modest gains.
- Elevated inventory and softening demand are contributing to downward pressure on prices, particularly in the Sun Belt.
- Price reductions are currently at 42% of active listings, indicating weak demand and potential for continued price softness.
- Regional variations will be significant, with some markets experiencing price gains while others face declines.
Transaction Volume and Sales Momentum
Home sales are anticipated to improve in 2026, driven by easing mortgage rates and pent-up demand.
- Existing home sales are projected to grow by approximately 4% in 2026, building on late 2025 momentum.
- The MBA Purchase Applications Index shows a year-over-year increase of 15-25%, indicating rising demand.
- New home sales remain steady, with builders offering incentives to maintain volume despite rising costs.
- The interplay of mortgage rates, demand, and economic conditions will determine the strength of transaction growth in 2026.
Strengthening Early-Stage Demand in Housing Market
The housing market is showing signs of increased buyer intent, suggesting a more favorable outlook for 2026.
- Buyer intent has been building after nearly four years, indicating a potential shift in the housing market.
- Conversion from applications to sales remains constrained, but early-stage demand is strengthening.
- Weekly pending home sales have reached their highest Q4 levels since the pandemic, signaling improved near-term sales activity.
- Pending contracts are running 1-5% above the same period in 2024, with Florida showing a standout performance of 15% more transactions than in fall 2024.
New Home Sales Trends and Challenges
New home sales have remained steady but are facing challenges as 2025 ends.
- New home sales have held in a narrow range of 660,000 to 680,000 units for nearly three years.
- Sales are running lower than in 2024, with permitting softening and builders pulling back on starts.
- Rising construction costs and the waning impact of mortgage rate buydowns are affecting sales.
- Forecast for 2026 anticipates approximately 688,000 new home sales, slightly above 2025 levels.
Home Building Activity and Permits
New construction activity has significantly decreased from recent highs.
- New construction activity is down 30% from recent peaks, with total permits showing a declining trend.
- The forecast for 2026 indicates modest growth in new home sales, driven by early-stage demand and rising existing-home inventory.
- Existing home sales are expected to contribute to incremental gains in new construction.
The Goldilocks Case for Home Sales
The housing market is positioned for potential growth in home sales due to favorable conditions.
- Weekly pending home sales data shows an 8% increase over 2024 levels, coinciding with stabilizing mortgage rates around 6.3%.
- Cumulative closed transactions are greater than 1% above 2024 through Q3 2025.
- A baseline forecast for 2026 suggests modest gains of 3.5-4%, with potential for 8-10% growth under favorable conditions.
Navigating the 2026 Housing Market
The housing market is transitioning into a more stable phase, presenting both challenges and opportunities.
- National home prices are expected to be flat in 2026, with a forecast of +0.5% appreciation.
- Mortgage rates are projected to average around 6.4%, improving from previous peaks.
- Existing home sales may rise from 4.1 million to approximately 4.25 million, driven by pent-up demand and stabilizing job markets.
Implications for Buyers, Sellers, and Professionals
Understanding the evolving market dynamics is crucial for all stakeholders in real estate.
- Buyers in Sun Belt metros are experiencing improved conditions with more selection and negotiating leverage.
- Sellers should price homes realistically, as 42% of active listings have taken price cuts.
- Real estate professionals need to provide localized expertise to navigate varying market conditions effectively.
