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What can we expect for the 2026 housing market?
Despite mortgage rate increases, the market is showing signs of recovery with month-on-month home sales gains, though it is not comparable to pandemic-level market activity.
“Instead of 10-20 offers on a property, there might be three or four, which are better odds,” Frey explains. According to Frey, it was insanely hot and out of balance before the interest rate increase in March of 2022, but the rate hike has given people some hope.
Some buyers dropped out of the market due to the rate hike. Buyers who previously lost out on multiple homes may not face as many rounds of offers and rejections now.
Possible mortgage rate decrease
According to the Freddie Mac Economic, Housing, and Mortgage Market Outlook from January 2025, “Limited housing inventory continues to drive house prices higher, as do elevated mortgage rates affecting affordability, which is weakening demand.”
The report also said that house construction slowed in November 2024, and mortgage rates remained elevated in December, ending at 6.85%.
The National Association of Realtors (NAR), meanwhile, predicts home sales will jump 14% as mortgage rates ease to roughly 6%. Yun says, “Next year is really the year that we will see a measurable increase in sales.” He adds, “Home prices nationwide are in no danger of declining.”
The outlook predicts that 2026 will see rates gradually decline, which would loosen some of the rate lock-in effects for current homeowners. This would then invite more activity and add more inventory to the market. The report also expects significantly higher home sales in 2026, with house prices continuing to grow at a moderate pace.
“Better to buy now and begin your experience of getting a fixed-rate housing cost,” Frey says, “It’s never too soon to start saving money.” The average 30-year mortgage rate has increased over the last few months, hitting almost 7% in August 2025 while rental prices continue in a decreasing trend.
Even though rates may have rebounded slightly, buying sooner rather than later guarantees a more predictable monthly payment.
At the peak of U.S. inflation, the rent-to-income ratio has hit 40%, marking the least affordable rental market in decades. As of September 2024, CoreLogic reports that the rent for single-family homes has hit the lowest in 15 years.
Inventory
Tight inventory has contributed to the growth in housing prices over the last few years. With more buyers on the market than homes for sale, it led to bidding wars and price inflation. While new home listings have slowed in recent years, what will housing inventory look like going forward?
According to the NAR, total existing home sales across single-family homes, townhomes, condominiums, and co-ops increased by 1.5% to a seasonally adjusted annual rate of 4.06 million in September. Year-over-year, sales saw a significant gain of 4.1%.
There are, however, some signs of inventory increasing. According to NAR, there are approximately 1.55 million units of unsold inventory, which is equivalent to 4.6 months’ supply.
Rising rental rates
Supply and demand are fundamental drivers in the economy, influencing rental prices. When supply exceeds demand, prices tend to drop. In the last two years, exceptional demand amid low supply propelled rental rates to surge by double digits annually, followed by a period of decline. In 2026, rents might see a rebound as prices are expected to increase by 2.3%.
Rent prices, as indicated in a February 2025 report from Rent.com, rose by 0.6% month-on-month and 0.4% year-on-year.
If you live in a market where rents have grown by double-digit percentages, locking in a fixed housing payment could be the best solution.
