2026 Real Estate Outlook: What Leading Housing Economists Are Watching

January 5, 2026

Residential Real Estate, Mortgages & Home Financing

Housing economists weigh in on the forces most likely to shape housing business in 2026—from mortgage rates and inventory to demographic and regional shifts.

Illustration of people putting together a house made of puzzle pieces

As the housing market enters 2026, leading economists point to a range of forces likely to shape the year ahead for buyers, sellers, investors and the real estate industry. While notable headwinds persist, they agree on one thing: The housing market is showing signs of a rebalance—and a rebound—in 2026.

REALTOR® News highlights experts’ predictions from the latest episode of the “Real Estate Today” podcast to help you strategize for the year ahead.

A Reawakening in Home Sales

Lawrence Yun, NAR Chief Economist

“We are seeing a little better condition for more home sales … with more inventory and the lock-in effect steadily disappearing—because life-changing events are making more people list their property to move on to their next home. Next year should be better with lower mortgage rates, and that will qualify more buyers. We are expecting home sales to increase by about 14% nationwide in 2026.”

Equity remains, but home prices moderate: “Home price growth will be minimal—roughly 2% to 3%—about the same as overall consumer price inflation. Generally, wage growth will be above that. So, it’s a year where people’s income begins to rise a little faster than consumer price inflation and home prices—and this is a welcoming development. We want people to have more purchasing power. Home prices are in no danger of any major decline, and even a 3% gain will bring smiles to many homeowners.”
Less pressure on buyers: “Inventory levels are about 20% above one year ago, so there are more choices for consumers. We’re not back to pre-COVID inventory yet, which I would consider normal, so we’re still in a slight housing shortage condition. But consumers do not have to rush decisions the way they did before—there are more choices out there and less prevalence of multiple offers.”
The American dream is still alive: “The desire for homeownership has not fallen. Many renters say that if the conditions are right, they would like to become homeowners. The past couple of years have been frustrating because of elevated mortgage rates, but things will be much better to achieve that American dream of ownership in 2026—with more inventory choices and mortgage rates falling.”

Supply-Side Signals

Robert Dietz, National Association of Home Builders chief economist

“We’re seeing some improvement [in new-home construction]. One of the big helping factors is the ongoing easing from the Federal Reserve. While the Fed doesn’t control mortgage interest rates, lowering the Fed funds rate does have a direct effect on the interest rates that builders pay on construction and development loans. That’s good news for the supply side, good news for inventory and, therefore, good news for home buyers and renters. For 2026, we’re looking for about a 1% gain in single-family home building and about a 1% gain in new-home sales.”

New homes vs. resale pricing—an unexpected dynamic: “The median resale home price right now is actually more expensive than the median price of a newly built home. That’s only happened two or three times over the last few decades. The combination of builder incentives, including price cuts and the geography of where new construction is occurring has produced this odd situation where the typical resale home is more expensive than a newly built home.”
Housing deficit remains a major headwind: “Even though inventory has increased in most markets, there’s still a structural housing deficit. The housing stock is not large enough given the size of the population. This housing deficit remains a major constraint on affordability. The only way to really solve the housing affordability challenge is to build our way out of it. We need more single-family homes, more multifamily homes and more homes for both sale and rent to meet the needs of a younger population. “A major limitation on the supply side comes to zoning and land-use policies. For example, townhomes are one of the bright spots for affordability, but zoning laws often limit the density needed to build them. Those policies need to be updated to allow for more efficient, medium-density construction.”
A geographic shift to watch: “One of the trends we’re keeping a close eye on for 2026 is geography. We’ve seen new-home markets slowdown in previously hot markets like Texas and Florida, in part because of some limited cyclical overbuilding and the fact that mortgage rates remained above 6% in 2025. But there are also pockets of strength emerging, particularly in the Midwest. Markets like Columbus, Ohio, Indianapolis and Kansas City—areas that have long been more affordable and are close to major universities—are showing outsized growth.”

Housing Affordability Improves

Danielle Hale, realtor.com® chief economist

“The biggest trend that we’re most excited to see is an improvement in affordability. That’s going to be good news for buyers and a contributor to the fact that home sales will finally start to go up and get away from this 4 million home sales floor that we’ve been very stuck on over the last couple of years. Improving affordability is a really important component of that increase in home sales for 2026.”

Pricing sensitivity and balance: “In recent data, we’ve noticed that the share of sellers pulling their homes off the market is higher than normal. Even then, it’s still only about 6% of listings, so it’s definitely not the norm. What it reflects is a more balanced housing market where not every seller is getting exactly what they want. Some are choosing to come down in price, and others are choosing to walk away and come back at a later date because they have the flexibility to wait. “Using NAR month-supply data, the housing market is the most balanced it’s been in almost a decade. Buyers have a little more leeway; sellers have to be more flexible, and that’s a big shift from the pandemic years when sellers had nearly all the leverage.”
Monthly payments ease: “Our estimates suggest this will be the first time we see monthly payments decline since 2020. Mortgage rates are expected to be lower, which helps offset the roughly 2% home price growth [that we expect in 2026]. On net, affordability is improving because those monthly payments are shrinking, and incomes are also expected to grow. In real terms, home prices are actually going to decline, meaning they’ll be more affordable relative to other goods and services. That doesn’t mean we’ll see sticker prices fall, but it does mean affordability is improving.”
Regional divergence and policy stability: “While the national numbers are fairly modest, we’re seeing much more variation at the regional level. In the South and West, where policies have enabled more construction, housing markets are more in balance. In the Northeast and Midwest, inventory still lags behind pre-pandemic norms, and prices have continued to rise. “Policy change is something we still have to keep an eye on, but I expect the pace of policy change to slow in 2026. That will make it easier for everyone—from buyers and sellers to builders—to anticipate what’s ahead and make plans without constantly reacting to new policy shifts.”

Demographic Trends Reshape the Market

Jessica Lautz, NAR deputy chief economist

“We’re watching the share of first-time home buyers and the share of all-cash buyers, because that push-and-pull has really dominated the market. Another trend I watch closely is the growing share of single female buyers: We’re seeing single women really growing as a force in the market, and that reflects lower marriage rates and lower birth rates. There will continue to be people who buy homes, but it could be a different type of person than what we have seen historically. These demographic shifts are really shaping who is able to make moves in this housing market.”

First-time buyers gradually re-emerge: “We know that interest rates have come down some, and we also know that there has been more supply entering the market in the existing-home sales space. With more inventory and slightly improved affordability conditions, that does mean an opportunity for first-time home buyers. I hope they are able to take advantage of that next year. We need them to come in so that we can see more movement in the housing market and healthy growth … because homeownership is a wealth-building tool.”
Baby boomers remain the dominant force: “We are seeing that baby boomers are really the dominating force in today’s housing market. They have a ton of housing wealth, and they’re able to make trades right now—move close to the grandkids and move where they want to be. They’re not making many concessions on their home choices, and they have the funds to really make those choices. “If we continue to see this large share of retirees, we could continue to see smaller households and different housing choices than what we’ve seen historically. Just a quarter of buyers have kids. If we look at the demographics, we know that home size is shrinking and the number of people in the household is shrinking. With a larger share of retirees in the market, we’re seeing fewer buyers with young children.”
All-cash buyers aren’t going away: “Mortgage applications have been trending up for a couple of months, so we are seeing more buyers enter the market who are not all-cash. That being said, I don’t think all-cash buyers are going away anytime soon, just because of the wealth that is in this housing market and the ability of homeowners to make trades without a mortgage.”

All Eyes on Mortgage Rates

Nadia Evangelou, NAR senior economist

“For the last few years, we have been in one of the toughest affordability environments in modern housing history. Mortgage rates jumped from 3% in 2021 to above 7% in 2023, and that pushed the typical payment up by more than $1,000 a month compared to pre-pandemic levels. But what happens if rates move down from 7% to 6%? We expect the buyer pool to increase significantly.”

Mortgage rates as a major unlock: “Nationally, a one percentage-point drop in mortgage rates can expand the pool of households who can qualify to buy by about 5.5 million households, including about 1.6 million renters who could become first-time buyers. That’s a huge shift in who can realistically afford to buy. Not all of these 5.5 million households will buy a home, but based on our analysis, about 10% typically do. That could translate into about 500,000 additional home sales in 2026. That’s the main reason that we expect home sales activity to increase next year.”
More inventory needed to match incoming demand: “Mortgage rates alone don’t make a stronger market. Inventory is another component that needs to cooperate. Inventory is rising—it’s higher than a year ago—but if more buyers come back, we’re going to need even more homes available for sale.”
Middle-income buyers still constrained: “Even with progress in affordability, middle-income buyers can afford to buy just 21% of the homes currently available for sale. Before the pandemic, they could afford about 50%. That’s a very dramatic difference, and it shows why we need a targeted approach—homes that align with people’s incomes.”

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