The U.S. housing market is poised to improve only gradually next year as mortgage rates edge lower, incomes rise and more inventory comes to market, according to Realtor.com’s newly released 2026 Housing Forecast. But the platform cautions that the recovery remains fragile, with sales stuck well below normal levels and economic and political risks still clouding the outlook.
Realtor.com expects the average 30-year mortgage rate to hover around 6.3% in 2026, down modestly from 2025’s 6.6% average. Combined with continued income gains, the decline should ease the squeeze on affordability: the typical mortgage payment is projected to absorb 29.3% of median household income, dipping below the 30% threshold for the first time since 2022. National rents, meanwhile, are forecast to fall 1% by year-end.
Home prices are projected to rise 2.2% next year, following a 2% gain in 2025. But with inflation expected to run hotter, real (inflation-adjusted) prices will fall for the second consecutive year–an unusual backdrop that gives buyers more breathing room even as nominal prices inch higher.
“After a challenging period for buyers, sellers and renters, 2026 should offer a welcome, if modest, step toward a healthier housing market,” Danielle Hale, Realtor.com’s chief economist, said in the report. “Incomes climbing faster than inflation as mortgage rates steady at a lower level create space for affordability to improve. It’s not a dramatic reset, but it’s a meaningful shift back toward balance.”
Key Projections for 2026
Realtor.com’s baseline outlook calls for:
- 30-year mortgage rates averaging 6.3%. After a volatile 2025, borrowing costs are expected to stabilize as slowing growth and the end of Fed quantitative tightening counterbalance rising government debt and temporary inflation pressures.
- Home prices rising 2.2%. Real prices fall slightly again as inflation outpaces nominal gains.
- National rents declining 1%. Softer rent growth is expected to be more pronounced in the South and West.
- Active inventory expanding 8.9%. Listings rise for a third straight year.
- Single-family housing starts rising 3.1% to roughly 1 million units.
- Existing-home sales increasing 1.7% to 4.13 million–still historically weak.
- Affordability improves as the payment-to-income ratio falls to 29.3%.
- A balanced market, with 4.6 months of supply on average.
Inventory Recovery Enters Its Third Year
Supply continues to rebuild as more homeowners list properties and new construction edges higher. Active listings are expected to rise nearly 9% in 2026, extending a recovery that began in 2024. By year-end, inventory should sit about 12% below pre-pandemic norms–an improvement from 2025’s 19% deficit and 2024’s 30% shortfall.
With supply rising faster than demand, the national market should maintain about 4.6 months of inventory next year–still shy of the six-month level that typically signals a buyer’s market, but enough to shift modest bargaining power toward purchasers. Younger and first-time buyers, however, will continue to face affordability constraints.
Home Prices Rise, but Inflation Outruns Gains
Nominal home prices are expected to extend their slow upward trajectory, but inflation will again erode those gains. Consumer prices are forecast to climb more than 3%, outpacing the 2.2% rise in home values, leading to a second straight year of real price declines.
Affordability Takes a Step in the Right Direction
The combination of lower rates, rising incomes and slower home-price appreciation should deliver one of the first meaningful affordability improvements since 2022. Realtor.com expects the typical monthly payment on a median-priced home to fall 1.3% from 2025.
“The path back toward historic affordability will be gradual,” Hale said. “But for buyers who have spent years navigating limited options and steep competition, more inventory and slightly lower cost burdens could be a game-changer.”
Renters See Relief as Multifamily Supply Surges
Renters will benefit from a wave of multifamily completions, which is expected to push vacancy rates toward or above the long-term 7.2% average. National rents are projected to decline 1% in 2026, with sharper drops likely in the South and West, where construction pipelines have been heaviest.
High-cost, high-density markets such as New York City will remain outliers, with rents staying elevated and affordability still strained.
Sales Edge Higher, but Lock-In Effect Lingers
Existing-home sales are forecast to rise 1.7% next year, reaching 4.13 million transactions–one of the weakest tallies in nearly three decades. Despite marginal improvement, deeply entrenched rate lock-in remains a critical drag.
Roughly 80% of mortgage borrowers still carry rates below 6%, giving homeowners little incentive to sell unless compelled by major life events. That dynamic is expected to persist well into 2026, keeping turnover depressed even as underlying conditions improve.
Policy and Economic Risks
The housing outlook remains vulnerable to several macro risks. Policy uncertainty–especially around trade and fiscal measures–could influence the path of inflation, while an unexpected shift by the Federal Reserve remains a major wildcard. A cooling labor market could dampen spending and housing demand, and renewed inflation pressure from tariffs, energy markets or supply-chain disruptions could lift mortgage rates again.
While a recession is not Realtor.com’s base case, the platform warns that the economy remains in a sensitive transition period. Any policy misstep or deterioration in consumer sentiment could disrupt the sector’s slow march back toward normality.
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