Our Housing Market Outlook is here to help you navigate a market that isn’t always easy to interpret. By examining the latest data, economic conditions, and emerging trends, we share our predictions for the year ahead to help you make more confident housing decisions.
Michelle Battermann | CA DRE #2085800
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2026 marks a step toward “normal.” After four years of pandemic-driven extremes — including frozen migration, volatile mortgage rates, major affordability challenges, and uneven supply across regions — the U.S. housing market enters a new era. In this next phase, home sales are positioned to meaningfully grow again, and affordability starts to improve as home prices level out and mortgage rates come down. Many of the unusual dynamics of the early 2020s are beginning to fade: mobility is slowly picking up, inventory is normalizing in many regions, and buyers and sellers are resetting their expectations after years of dramatic changes.
Nationally, buyers could benefit from 10% growth in the number of homes on the market, bringing more options and improved affordability.
Home prices are expected to rise modestly by 0.5% while incomes grow faster—conditions that would improve affordability.
Mortgage rates are expected to trade in a range of 5.9%-6.9%, with an average of about 6.4% for the year, offering buyers a more favorable financing environment.
Home sales could reach 4.25 million, a 5% increase from 2025, as lower rates and growing inventory draw more buyers back to the market.
After years of affordability challenges, the housing market is entering a new phase of improved affordability, not through a dramatic price correction, but through an extended period of flat home prices, rising incomes, and gradually falling mortgage rates.
Looking ahead, incomes are expected to grow faster than home prices, easing affordability pressures.
Source: Compass, Altos Research, US Census • Estimates for 2025 and 2026 incomes and 2026 home prices
Since 2022, Americans have been moving far less than usual, and that shift has reshaped migration patterns and housing inventory nationwide. This period of frozen mobility, known as “The Great Stay,” forced many potential buyers and sellers facing economic uncertainty and diminished affordability to delay their plans to move.
But signs of a thaw are beginning to emerge: the mortgage rate lock-in is fading, more homeowners are looking to move, and work-from-home has endured allowing for greater mobility.
The Great Stay reshaped regional housing patterns, tightening supply in the North while expanding inventory in the South and West. For buyers and sellers, these differences will influence pricing power, competition, and how quickly homes sell in 2026.
Source: Altos Research, Compass • Average days on market, single-family homes in contract. Data as of Nov 14, 2025
— Mike Simonsen, Compass Chief Economist
Divergent economic conditions will continue to shape market behavior in uneven ways. Inventory levels vary sharply nationwide, with buyers and sellers facing different conditions depending on their local market challenges. Additionally, the gap between wealthier households and financially pressured buyers will continue to be one of the biggest forces shaping the market.
The data reveals pent-up activity waiting for the right conditions. By November 2025, nearly 60% of listings were being withdrawn, signaling a large group of sellers who were ready to move but ultimately held back, creating a high volume of “shadow inventory.”
At the same time, purchase mortgage applications were up 15-25% year-over-year, while sales rose only 2-4%. Buyer interest far outpaced closed sales, contributing to rising “shadow demand.”
Source: Altos Research, Compass • Average days on market, single-family homes in contract. Data as of Nov 14, 2025
The estimated number of additional homeowners interested in selling their homes when market conditions improve, based on listings withdrawn in 2025.
After four years of frozen mobility and affordability challenges, the U.S. housing market is turning a corner. Home prices are expected to flatten, mortgage rates should ease modestly, and sales activity is positioned to grow for the first time since the pandemic. Affordability will improve gradually as incomes rise faster than prices, not through dramatic correction, but through steady rebalancing.
If you are looking to buy or sell a home, especially with a green focus, and want to work with a Real Estate Agent who has a resume of high quality service, commitment to excellence, and top business performance, contact Michelle Battermann.
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