Housing Market Outlook for 2026: Signs of Recovery and New Opportunities
Photographer by Palma Design 2025
After several slow and challenging years, the housing market is expected to show meaningful improvement in 2026. Economists are pointing to a combination of easing mortgage rates and growing housing inventory as key factors that could bring buyers and sellers back into the market. For many in the real estate industry, the coming year represents a long-awaited opportunity for renewed activity.
According to projections from the National Association of REALTORS®, existing home sales are expected to rise by approximately 14% nationwide in 2026. This increase would mark a significant rebound following years of limited movement caused by high interest rates and affordability challenges.
Much of this optimism is tied to anticipated changes in mortgage rates. If rates fall to around 6%—down from roughly 7% at the start of 2025—millions of additional households could become financially qualified to purchase a home. Estimates suggest this shift could open the door for about 5.5 million more buyers, including a sizable number of renters transitioning into homeownership.
Lower mortgage rates alone, however, will not fully solve affordability issues. Economists emphasize that increased housing supply will be just as critical. A healthier balance between supply and demand is expected to create more flexibility for buyers and encourage more sellers to enter the market.
Preparing for Increased Market Activity
With more movement expected in 2026, real estate professionals are encouraged to adjust their strategies to meet changing conditions.
Re-engaging sidelined buyers will be essential. A drop in interest rates could motivate renters, younger buyers, and higher-income millennials who were previously priced out to re-enter the market. Outreach efforts aimed at these groups may prove especially effective.
Pricing accuracy will also play a major role. Buyers remain highly sensitive to monthly payments, and homes priced above market value—even slightly—are likely to sit longer and require price reductions. Well-priced homes, on the other hand, are expected to attract immediate attention and stronger offers.
Inventory composition matters as much as inventory volume. Mid-priced homes that align more closely with local incomes are expected to drive demand. In many markets, middle-income buyers can currently afford only a small share of available listings, a sharp decline from pre-pandemic levels. Areas that offer more attainable options are likely to recover faster.
Builders have begun responding to these affordability gaps. Townhomes, which often provide a more accessible entry point for buyers, now represent a growing share of new single-family construction.
Migration trends will continue to influence housing demand. Regions in the South, Mountain West, and parts of the Midwest remain attractive to new residents, and markets experiencing population growth are expected to see stronger sales activity.
Finally, while national forecasts are positive, recovery will not be uniform. Some markets will rebound faster than others, depending on how well housing costs, income levels, and job growth align. Areas where these factors converge are likely to experience the strongest momentum.
Key Indicators to Watch in Local Markets
Several metrics can help predict whether a local market is positioned for growth in 2026, including:
Household income growth
Job and employment expansion
Growth in millennial households
Increases in rate-qualified buyers if mortgage rates decline
Strong domestic migration patterns
The share of homes with price reductions
Availability of homes at attainable price points
Alignment between mortgage and rental costs
Growth in single-family building permits
Increased mortgage originations signaling stronger buyer activity
Adapted from “NAR 2026 Forecast Summit Predicts Positive Recovery, With Regional Affordability Hurdles” by Melissa Dittmann Tracey, National Association of REALTORS®, December 10, 2025.
