2026 Housing Market Forecast: Slow Growth and Decreasing Rents

In 2026, home price growth is expected to slow significantly, with an anticipated increase of just 1.2% according to Realtor.com's midyear update. This increase falls short of inflation, effectively representing a decline in real terms. Despite a strong economy, high mortgage rates have counterbalanced earlier decreases, impacting overall price movements.

Realtor.com revised its forecast for existing-home sales in 2026 to 4.10 million—slightly down from previous estimates but still a 1% growth from 2025. This indicates a recovery momentum in the latter half of the year. Concurrently, rental prices are projected to decrease, offering some relief to the rental market.

Danielle Hale, chief economist at Realtor.com, notes that the housing market is stabilizing rather than booming, with sellers adjusting expectations to benefit buyers. The expected increase in activity by year's end suggests more buyers and sellers will likely reach agreeable terms as the market adapts.

Inflation and geopolitical tensions have kept mortgage rates steady at around 6.3%. Economic resilience, particularly in the labor market, and inflationary pressures, including those stemming from the Middle East conflict, have influenced these rates. The Federal Reserve's pledge to maintain price stability, combined with shifting market expectations, emphasizes the volatile nature of current macroeconomic conditions.

Home sales began the year slower than expected but picked up as sellers adjusted pricing strategies. For 2026, home sales are anticipated to reach 4.10 million, with broader affordability improvements thanks to cooled price growth. Monthly mortgage payments are expected to decline, taking a smaller portion of household income.

Homeownership rates have been revised upward following stronger-than-anticipated sales data. This suggests an increase in young buyers entering the market, despite ongoing affordability challenges. Meanwhile, homebuilding faces regional disparities, with significant opportunities in the Northeast and Midwest due to housing shortages.

The rental market is poised to benefit from a strong supply of multifamily constructions, with rents projected to decrease by 1.2% this year. However, the sustainability of this trend depends on whether new housing supplies can keep up with rental demand. Additionally, the rise of off-market private listings poses a potential challenge, as these may reduce buyer visibility and affect market valuations.