Housing Market Predictions for 2025 and 2026: Will it Rebound?

Worried about where the housing market is headed? You're not alone. Everyone's wondering if now's the right time to buy, sell, or invest. Based on my research and experience at Norada Real Estate Investments, the U.S. housing market is set for a gradual rise through the rest of 2025. Expect mortgage rates to dip slightly, which is good news, but don't expect a huge price drop. In fact, we expect growth in home prices to continue into 2026 as rates inch down and demand rises.

I know, that's not as exciting as a ‘boom' headline, but it’s a more realistic picture based on the data I've been digging into. Let me explain why, and break it all down for you.

Housing Market Predictions for 2025 and 2026

Where Things Stand Now: A Flicker of Optimism (August 2025 Update)

Things are still a bit uncertain in the housing market, but recent data from the National Association of REALTORS® (NAR) gives me a little hope.

According to their latest Existing-Home Sales Report (August 21, 2025), sales increased by 2.0% in July. It's not a massive jump, but it's a move in the right direction! Months supply of inventory increased 0.6% from June.

Here are some key takeaways from the NAR report:

• Sales are up: Existing-home sales rose 2.0% month-over-month.
• Inventory is growing: Total housing inventory increased 0.6% from June and 15.7% year-over-year to 1.55 million units.
• Prices are inching up: The median existing-home price is up 0.2% year-over-year to $422,400.

NAR Chief Economist Lawrence Yun seems optimistic, saying, “The ever-so-slight improvement in housing affordability is inching up home sales.” He also pointed out that wage growth is outpacing home price growth, and buyers have more choices but also stated that roughly half of the country seeing price reductions in homes, which is something I have also have seen over the recent years!

Mortgage Rates: The “Magic Bullet” or Just a Temporary Fix?

High mortgage rates have been a major drag on the market, no doubt about it. But there's a glimmer of hope here, too.

Yun calls mortgage rates the “magic bullet” for the market. He expects them to average 6.4% in the second half of 2025 and dip further to 6.1% in 2026.

And while the NAR numbers don't reflect that dramatic of a decrease, I lean towards expecting that rates will drop a bit by the end of 2025, probably to around 6.2% to 6.4%. Then, in 2026, they could go even lower, maybe down to 5.8% to 6.0%.

Here's the thing: even small changes in mortgage rates can make a big difference in affordability (as Yun notes). And better affordability can bring a lot more buyers into the market.

Home Prices: Steady as She Goes, with Regional Differences

Home prices haven't been climbing rapidly as they were during the pandemic, a little more like a hot air balloon slowly rising to the top. Lawrence Yun makes a prediction on modest home prices to continue in 2025 and 2026.

NAR states that median home price in July to be $422,400, which is a slight increase from last year. These small rises in prices tell me prices are staying relatively stable, even with higher rates. However, what I've seen, is that depending on where you area, it might drastically affect the prices in your respective regions, it will be wise to know the forecast of where you are looking to buy/sell.

Inventory: A Welcome Change for Buyers

The increase in the amount of available homes is good for buyers. Yun points out that current inventory is “at its highest since May 2020.” There are more homes on the market now than there have been in the past several years. This is not only great news, but the best news I have heard!

More Homes Changing Hands

I think with the mortgage rates slightly easing, and more inventory available, and prices levelling off, that we will see more homes being sold. NAR's forecast also agrees with this, Lawrence projects a 6% increase in 2025 and accelerate by 11% in 2026.

Regional Differences: Sun is Shining in the South

NAR's report highlights some interesting regional differences.

• Northeast: Sales are up 8.7% month-over-month, with a median price of $509,300 (up 0.8% year-over-year).
• Midwest: Sales are down 1.1% month-over-month, with a median price of $333,800 (up 3.9% year-over-year).
• South: Sales are up 2.2% month-over-month, with a median price of $367,400 (down 0.6% year-over-year).
• West: Sales are up 1.4% month-over-month, with a median price of $620,700 (down 1.4% year-over-year).

According to Yun, the market is very different across the country, but the trends seem steady and are not crashing anytime soon.

What This Means for You

So, based on the NAR report and my observations, here's what I think it means for you:

• Buyers: You have more options than you've had in years, and it looks like mortgage rates may be coming down. Work with a good agent to find the right home for the best price in this environment.
• Sellers: Price competitively, and be prepared to negotiate. The market is shifting, and buyers have more power.
• Investors: Focus on areas with strong job growth and rental demand. The South still seems like a good bet, but do your due diligence.

In Conclusion: A Cautious Dose of Optimism

The housing market is still complex, but the latest data from NAR and Realtor.com, coupled with my own take on the current market, does provide just a bit more optimism. It's not a wild party, but more like a calm afternoon.

By staying informed and working with experienced professionals, you can make those smart steps and achieve your real estate goals. As a real estate broker with many years of experience, I know how difficult it is to navigate the housing market. Contact me or someone on my team, so that we are able to assist you in the best possible way!