A Reawakening in the Housing Market: What 2026 Could Mean for Buyers and Sellers

After several challenging years marked by high mortgage rates and limited inventory, the U.S. housing market is showing signs of renewed life. Economists across real estate, homebuilding, and housing policy agree: 2026 is shaping up to be a year of gradual recovery—one driven by improving affordability, easing mortgage rates, and shifting demographics.

Home Sales Are Poised for a Comeback

Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), sees momentum building as more homeowners begin to move again.

“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,” Yun explains.

Looking ahead, Yun expects lower mortgage rates to unlock more demand.

“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.”

Home Prices Stabilize While Purchasing Power Improves

While prices are not expected to fall dramatically, growth is likely to slow—bringing welcome relief to buyers.

“Home price growth will be minimal—roughly 2% to 3%—about the same as overall consumer price inflation,” Yun says. “Generally, wage growth will be above that… We want people to have more purchasing power.”

Importantly, Yun stresses that homeowners remain protected.

“Home prices are in no danger of any major decline, and even a 3% gain will bring smiles to many homeowners.”

Buyers Gain Leverage as Inventory Improves

Rising inventory levels are shifting the balance of power.

“Inventory levels are about 20% above one year ago, so there are more choices for consumers,” Yun notes. “Consumers do not have to rush decisions the way they did before—there are more choices out there and less prevalence of multiple offers.”

Although inventory still hasn’t returned to pre-pandemic norms, the market is clearly less frenzied than in recent years.

The American Dream Remains Intact

Despite frustration over high mortgage rates, demand for homeownership remains strong.

“The desire for homeownership has not fallen,” Yun says. “Things will be much better to achieve that American dream of ownership in 2026—with more inventory choices and mortgage rates falling.”

Builders Add Supply—But Challenges Remain

On the supply side, Robert Dietz, Chief Economist at the National Association of Home Builders (NAHB), sees modest gains in new construction.

“One of the big helping factors is the ongoing easing from the Federal Reserve,” Dietz explains. “Lowering the Fed funds rate does have a direct effect on the interest rates that builders pay on construction and development loans.”

As a result:

“For 2026, we’re looking for about a 1% gain in single-family home building and about a 1% gain in new-home sales.”

Interestingly, pricing dynamics have shifted in unexpected ways.

“The median resale home price right now is actually more expensive than the median price of a newly built home,” Dietz says—an unusual trend driven by builder incentives and where new homes are being constructed.

Still, Dietz emphasizes that a structural housing shortage persists.

“The only way to really solve the housing affordability challenge is to build our way out of it,” he says, pointing to zoning and land-use restrictions as key barriers to affordable construction.

Affordability Finally Improves

Danielle Hale, Chief Economist at realtor.com®, calls affordability the most encouraging trend heading into 2026.

“That’s going to be good news for buyers and a contributor to the fact that home sales will finally start to go up,” Hale says.

She also notes a healthier balance between buyers and sellers.

“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.”

For the first time in years, monthly payments are expected to decline.

“This will be the first time we see monthly payments decline since 2020,” Hale explains. “On net, affordability is improving because those monthly payments are shrinking, and incomes are also expected to grow.”

Demographic Shifts Are Reshaping Demand

Jessica Lautz, Deputy Chief Economist at NAR, highlights how changing demographics are influencing who buys homes.

“We’re seeing single women really growing as a force in the market,” Lautz says, reflecting broader trends like lower marriage and birth rates.

First-time buyers are slowly returning as conditions improve.

“With more inventory and slightly improved affordability conditions, that does mean an opportunity for first-time home buyers,” she says, emphasizing their importance to long-term market health.

At the same time, baby boomers remain a dominant force.

“They have a ton of housing wealth, and they’re able to make trades right now,” Lautz explains, often without needing a mortgage.

Mortgage Rates Hold the Key

NAR Senior Economist Nadia Evangelou underscores just how critical mortgage rates are to unlocking demand.

“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,” she says.

Even small declines could have a major impact.

“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,” Evangelou explains—potentially resulting in hundreds of thousands of additional home sales.

However, she cautions that supply must keep pace.

“Mortgage rates alone don’t make a stronger market. Inventory is another component that needs to cooperate.”

Looking Ahead to 2026

Taken together, these insights point to a housing market that is not overheating—but healing. Slower price growth, improving affordability, easing mortgage rates, and evolving buyer demographics all suggest a more sustainable and accessible market in 2026.

While challenges remain—particularly around supply and affordability for middle-income buyers—the overall outlook is cautiously optimistic. After years of strain, the housing market appears to be waking up.