Home sales and prices could trend up slightly, but don't expect big mortgage rate drops.
Takeaways:
Home prices are expected to rise a modest 2-4%, significantly slower than pandemic-era growth.
Inventory might increase 5-10% but home sales could jump 10-20%.
Mortgage rates will likely hover above 6% with no dramatic drops expected.
Regional differences: the Sun Belt may continue cooling while the Northeast and West could remain tight and expensive.
The housing market has been anything but normal since 2022.
Three straight years of depressed sales. Record-high prices that kept climbing even as mortgage rates doubled. And through the rollercoaster of a post-pandemic housing market, everyone keeps wondering: When will things get better?
For millions of would-be buyers sitting on the sidelines and sellers locked into their ultra-low mortgage rates, 2026 may be a turning point. And the 2026 real estate market might finally start normalizing after a wild few years.
Inventory is finally expanding after years of scant supply. Americans’ wages are catching up to home prices as values see more moderate growth. And mortgage rates, while still elevated, show signs of stabilizing at the 6% mark.
But even with these slight improvements, experts say buyers and sellers shouldn’t expect miracles in the year ahead. The housing recovery will be modest, uneven and nothing like the pandemic-era rush.
Here are experts’ top 2026 real estate market predictions.
Home Prices Rise 2-4% in 2026
Most housing economists expect home prices will rise about 2% to 4% nationally in 2026. That’s a dramatic slowdown from 2021 and 2022 when ultra-low mortgage rates created a buying frenzy that spiked home prices.
Lawrence Yun, NAR’s chief economist, forecasts prices will rise "in the low single digits and maybe below people's income growth or wage growth." In July, NAR projected median existing-home prices will see a modest 4% year-over-year bump.
Fannie Mae is calling for slightly stronger growth at 3.6%, though that’s down from 5.2% in 2024. Zillow has the most conservative stance, predicting nearly flat appreciation at just 0.4% — a significant revision from earlier forecasts that anticipated negative growth.
Mike Simonson, chief economist with Compass Real Estate, takes an even more cautious outlook.
“We’ll see probably half a percent growth in home prices in 2026, with models showing a plus or minus 4% variation,” he says.
Why Prices Won’t Crash
Despite affordability headwinds, a nationwide price correction remains unlikely. Here’s why:
Record-low distressed properties. Mortgage delinquencies sit near historic lows, hitting 3.42% nationally in September, according to Intercontinental Exchange (ICE) data. Foreclosures are relatively rare. Most homeowners are still sitting on record-high equity ($17.8 trillion) as of the second quarter 2025, ICE reported. Of that figure, $11.6 trillion remains tappable, meaning homeowners could access their equity and leave 20% of their home’s value untouched, giving them a reliable cushion to weather financial hardship.
Persistent inventory shortages. The U.S. is facing a housing deficit of about 4.7 million homes, according to Zillow’s estimates released in July. Of course, this varies by area. Inventory in much of the Northeast is scarce while some markets in Florida and Texas have oversupply.
"The size of the shortage varies by market because real estate is local, yet undersupply still puts a floor under prices and constrains sales since you can't buy what is not for sale,” says Odeta Kushi, deputy chief economist at First American.Incomes are catching up. After three years of flattening home prices, wages are finally growing faster than housing costs, Simonsen says. This gradual improvement in affordability makes a price crash less likely.
Housing Inventory Could Increase by 5-10%
After 22 straight months of inventory growth through late 2025, active listings reached 4.6 months of supply as of September, NAR reported. Compare that to the anemic 0.6 months during the pandemic boom.
Experts foresee another 5% to 10% increase in the number of available homes in 2026. Some markets like Denver and Dallas are returning to pre-pandemic inventory levels. But the national picture remains about 10% below 2019 levels, according to an analysis from ResiClub.
Despite more existing inventory coming back online, don’t expect a true buyer’s market anytime soon. That usually requires seven or more months of inventory, and reaching that threshold “will likely take time and would probably require either a significant increase in inventory or a softening in demand,” Kushi notes.
This means buyers will have more choices in 2026, but it won’t be the abundant selection prior to the pandemic.
“While price growth has cooled and some markets have dipped, those declines have not erased the pandemic-era gains,” Kushi says. “Most homeowners still hold significant equity, giving them flexibility to wait out higher rates. The group most at risk if the labor market softens further are recent buyers who purchased near the peak with little down and missed out on earlier appreciation.”
What’s Driving Supply
The inventory story has potential to galvanize buyers, but as the saying goes, all real estate is local, so it depends on where you live. Here’s what has the power to move supply in the new year:
New construction gains. The National Association of Home Builders predicts approximately 1.05 million new single-family housing starts in 2026. New homes now account for about 26% of total housing inventory, compared to just 12% before the pandemic.
Lock-in effect easing. According to Realtor.com, about 82% of mortgaged homeowners have rates below 6%, but that share continues to shrink as more people buy at today’s rates.
"As of [November 2025], there are as many people with mortgages at 6% or higher as those who have 3% or lower,” Simonsen says. This shift changes behavior. People with 6.5% or higher mortgage rates face different financial pressures than those with 3% rates, making them more likely to sell if circumstances require.
Life events accumulate. After years of waiting it out, homeowners are likely to be less swayed by rate considerations and more by normal life transitions. Job changes, growing families, divorces and empty-nest downsizing continue regardless of rates.
Regional Hot (and Cold) Spots in 2026
The housing recovery won’t be the same everywhere in the country. The national numbers hide dramatic regional differences in experts’ 2026 real estate market predictions.
Northeast: Tight and Resilient
Markets like New York, Boston and Buffalo continue showing strength in home prices and demand due to severe supply constraints.
In Connecticut, for instance, there are 65% fewer homes available today than before the pandemic, Simonsen notes. Limited building opportunities due to less available land and reduced migration from these areas keep inventory painfully tight.
Sun Belt: Cooling After the Boom
Previously hot markets are losing steam. For example, many metros in Florida and Texas are facing oversupply and declining home prices after years of aggressive building and migration.
"The fact that southern states — Texas, Florida, Georgia — are seeing some price declines, I think this will offer that second chance opportunity for some buyers who are priced out,” Yun says.
The good news for buyers in the South, especially, is that inventory levels are normalizing, offering more choices with more negotiating power.
Midwest: Reliable Affordability
The Midwest offers the most predictable outlooks thanks to better affordability and stable inventory. As long as the local economies add jobs, people who work and live in the Midwest can comfortably afford homes, but inventory continues to be a challenge due these metros’ popularity.
West Coast: Still the Unaffordable Coast
Much of California, Seattle and Hawaii have home prices that far outpace wages, putting homeownership out of reach for many workers.
"One can have a job in California or Hawaii or Seattle, but they still can't buy,” Yun points out. Mortgage rates make an outsized impact here, too; even the smallest rate changes determine whether marginal buyers can qualify.
The Rocky Mountain states (think Utah or Colorado) are a different story with somewhat better prices. These areas benefit from California transplants seeking improved affordability, Yun notes.
Homes Sales Up 10-20%
After existing-home sales cratered to their lowest level in 30 years at 4.06 million in 2024, home sales were flat in 2025, expecting at 4.07 million homes, according to Zillow. In 2026, NAR is a bit more optimistic on sales, projecting a "meaningful" 10% to 20% gain, Yun says.
Meanwhile, Fannie Mae projects 4.46 million existing-home sales (up 9.2% year over year) for 2026.
Pent-up demand is there, but there’s a lot of unease about the direction of the job market and the broader economy, which may stifle the market in 2026, says Lisa Sturtevant, chief economist with Bright MLS, a Multiple Listing Service (MLS) with more than 100,000 members in the Mid-Atlantic region.
“People are feeling more economically unsure, more financially unsure,” she says. “And for a while, we've been seeing high-income folks continue to spend, but they are starting to pull back on spending. That tells me that this economic unease is sort of more broad based than it was earlier in 2025 and will really characterize how people are feeling moving into the next year.”
Mortgage Rates to Hover Above 6%
Hopes for sub-6% rates are dimming with most forecasts calling for mortgage rates to stay at or above 6% in 2026. Fannie Mae sees the potential for rates to end the year at 5.9%, but that’s the outlier.
Yun advises consumers not to expect dramatic drops.
"Consumers will not see 3%, 4% or 5%; I would say that’s a hard stretch,” Yun says. “But anything below 6%, consider that as a bonus rate condition."
However, economic uncertainty is a wild card that has the power to move rates. And what a wild year it’s been. The Trump administration’s approach to trade, immigration and other economic policies. Investors could see more of the same in 2026, keeping bond yields (which mortgage rates track) high, Sturtevant says.
“That's going to continue to be one reason why mortgage rates aren't going to fall as much as we might think they would, even in a recession,” Sturtevant explains, noting that investors are likely to be cautious. “The level of uncertainty around the [Trump] administration’s policies is problematic for people who are looking for rates to come down”
How Buyers and Sellers Can Win in 2026
While no one has a crystal ball and can perfectly predict the market in 2026, there are things buyers and sellers can do to prepare for a rebound.
1. Don’t try to time the market
Experts agree: If you wait to time the market for lower rates or home prices, you’re going to be disappointed. And it could cost you a home you really love. If rates come down later, you can consider refinancing.
“Timing the market is a fool's errand,” Simonsen adds, pointing to economic and political uncertainty. “So if you can afford the house and you want to be in it, then that's the house to get. There's no guarantee that rates are going down; they haven’t gone down in three years.”
2. Negotiate like a pro
Even if home prices in your area aren’t falling dramatically, other buyers might be on the sidelines, paralyzed by economic uncertainty. Use their indecision to your advantage and negotiate, especially on homes that need work or asking for seller concessions, Kushi recommends.
Look for homes that have been on the market longer, because this means you have more leverage with the seller and less pressure to pounce quickly. And if you’re in the market for a new home, shop around; builders are offering sweet deals on rate buydowns in many parts of the country.
3. Get preapproved and stay within budget
The best way to understand how much house you can afford is to get preapproved with a mortgage lender. This helps you understand what monthly payments will look like and your budget to shop for homes.
“Don't try to overstretch your budget just to become a homeowner,” Yun recommends. “One should be financially comfortable making the mortgage payment requirements.
It also pays to discover which loan program suits your situation best.
4. Have realistic expectations for your market.
While some markets will boom in 2026, others will still be firmly in sellers’ corner with supply constraints and high prices. Work with an agent to understand the opportunities in your area.
For instance, Sturtevant notes that in Washington, D.C., there’s a current oversupply of condos on the market versus single-family homes or townhomes. This means condos might offer first-time buyers a better shot at homeownership in that market, which may not be what they initially had in mind, she notes.
“As a buyer, figuring out where you might be willing to trade off is going to be really important in 2026,” Sturtevant says.
