6 housing market predictions for 2026, according to an economist

Here are predictions about the most important trends for the housing market in 2026:

1. Existing home sales will pick up (barely) 

Home sales have hovered near generational lows for three years now. As we head into 2026, there’s little reason to expect a sharp rebound, but the pieces are in place for a modest uptick.

Inventory levels are higher than they’ve been since 2019, and mortgage rates are lower than they’ve been since 2022. That combination should be enough to nudge existing home sales upward next year — just not by much. 

2. Home prices will be roughly flat 

I expect home prices to remain relatively flat in 2026. The main reason is higher inventory, putting downward pressure on prices. The Case-Shiller Home Price Index even showed a few seasonally adjusted declines last summer, though that trend faded by fall.

So why don’t I expect prices to fall further? Sellers have proven highly responsive to market conditions.

As the market shifted toward buyers, many homeowners who didn’t get the offers they wanted simply delisted their homes, while others decided not to list at all. That restraint helped slow the rapid inventory buildup we saw in early 2025, keeping prices from sliding much lower.

3. Inventory will climb to pre-pandemic levels 

Inventory, or the number of active for-sale listings, is likely to finally return to pre-pandemic levels nationally in 2026, perhaps as early as the spring selling season. It rose substantially in 2025, and the number of canceled listings suggests there’s a shadow supply of homes whose owners want to sell but are waiting for what they consider better timing.

I also expect to see a repeat of the “discretionary seller” trend: Homeowners willing to sell, but only if they get the right price. That tendency to test the waters and hold out for a strong offer should push up the average time on market, which in turn will increase the total number of listings at any given moment.

Higher inventory will give buyers a better chance of finding the right home — and a bit more leverage at the negotiating table.

4. The homeownership rate will decline 

At today’s prices and interest rates, homeownership remains out of reach for many middle-class Americans who, under different conditions, would already have bought their first home. Meanwhile, rent growth has slowed sharply, allowing many of these would-be buyers to bide their time and continue renting comfortably.

Add to this the growing share of renters who are opting for single-family homes because they seek the space and lifestyle of a house but don’t want to wait until they can qualify for a mortgage. 

5. We will avoid a recession in 2026 

The U.S. economy withstood a number of negative shocks in 2025, leaving it wobbly but still standing. Payroll gains have slowed to a crawl, but that appears to reflect a shrinking labor supply as much as falling demand — and initial unemployment claims never saw a big rise.

After the early-year turmoil over trade policy, U.S. companies have been beating earnings estimates in jaw-dropping fashion, while mentions of tariffs and trade concerns have become less frequent in earnings calls. Looking ahead, relief from tariffs seems likely, as court challenges and a steady drumbeat of new trade deals ease some of the costliest restrictions that were imposed in early 2025.

6. Mortgage rates will decline slightly 

Interest rates will likely stay below 6.25 percent for most of 2026 and could even dip slightly below 6 percent. The Federal Reserve’s shift to a rate-cutting cycle, combined with slower economic growth, has brought 10-year Treasury yields to around 4 percent, while the spread (how much higher mortgage rates are) has gradually moved back toward its normal range of 2 percent or less.

I expect that trend to continue as refinance risk on mortgage-backed securities gradually fades. That said, hopes for sharply lower mortgage rates have been repeatedly dashed since 2022, so buyers shouldn’t count on substantial declines in the year ahead.

To sum it all up: I’m expecting a mostly stable year, with some gradual, modest improvement on the most important housing market metrics: inventory, sales and mortgage rates.