Housing Market Forecast 2026: Will Prices Rise or Fall Next Year?

The housing market has been a rollercoaster in recent years, with fluctuating interest rates, inventory shortages, and economic uncertainties leaving many wondering what lies ahead. While the National Association of Realtors (NAR) has provided detailed predictions for 2025, the focus of this article is on what might unfold in 2026.

Using NAR’s 2025 forecast as a foundation, we’ll explore potential trends, scenarios, and key factors that could shape the housing market in 2026. From mortgage rates to job growth and the persistent housing shortage, here’s what buyers, sellers, and homeowners might expect.

Housing Market Forecast 2026: Will Prices Rise or Fall Next Year?

Before diving into 2026, it’s crucial to understand the baseline provided by NAR’s 2025 predictions. According to NAR Chief Economist Lawrence Yun, the housing market in 2025 is expected to stabilize with modest growth. Key highlights include:

• 3% growth in median home prices: A moderate increase driven by demand and limited supply.
• Rebound in home sales: Existing-home sales are projected to rise by 6%, while new-home sales could jump by 10% compared to 2024.
• Easing mortgage rates: Rates are anticipated to drop to around 6.4% by the end of 2025, making borrowing more affordable.
• Continued job growth: An estimated 1.6 million new jobs in 2025 will bolster housing demand.
• Low distressed sales: With serious mortgage delinquencies remaining minimal, there’s little risk of a foreclosure surge.

These trends set the stage for 2026, offering a glimpse into how the market might evolve. While specific data for 2026 isn’t available, we can project potential outcomes based on these 2025 indicators.

Potential Housing Market Trends for 2026

What might 2026 hold for the housing market? While exact predictions are impossible without new data, we can explore plausible scenarios based on the trajectory of 2025 trends. Here are some key possibilities:

1. Modest Price Growth Continues

If the factors supporting 2025’s 3% price growth—easing mortgage rates, steady demand, and limited supply—persist into 2026, home prices could see a similar or slightly higher increase. Should mortgage rates dip further below 6.4%, demand might surge, pushing prices up by 4% or more. However, if rates stabilize or rise slightly, growth could slow to 2-3%, reflecting a more balanced market.

2. Mortgage Rates: The Pivotal Factor

Mortgage rates remain the linchpin of the housing market. Yun has called them the “magic bullet,” and their direction in 2026 will be critical. If the Federal Reserve continues to ease rates beyond 2025, 2026 could see a stronger sales rebound and heightened price pressure. Conversely, if inflation resurges or economic conditions shift, rates might plateau or increase, cooling buyer enthusiasm and tempering price growth.

3. Sales Activity: Building on the Rebound

The anticipated 6% and 10% increases in existing- and new-home sales in 2025 suggest a market regaining momentum. If this trend carries into 2026, sales could rise further as more buyers enter the market, encouraged by lower rates and economic stability. However, any disruptions—such as an economic slowdown—could stall this progress, leading to flatter sales figures.

4. Inventory: A Persistent Challenge

The housing shortage, pegged at nearly 4 million homes by Realtor.com Chief Economist Danielle Hale, isn’t likely to resolve quickly. In 2026, tight inventory could continue to prop up prices, even if demand softens. On the flip side, a significant boost in new construction—spurred by 2025’s sales rebound—might ease supply constraints slightly, moderating price growth in some regions.

5. Economic Stability and Job Growth

If job growth remains robust in 2026, adding another 1.5-2 million jobs, it will reinforce housing demand. A strong labor market gives more people the confidence and means to buy homes, supporting both sales and prices. However, an economic downturn or stagnation could weaken this foundation, reducing buyer activity and slowing market growth.

The Housing Shortage: A Defining Influence in 2026

The chronic undersupply of homes will likely remain a dominant force in 2026. With a deficit of nearly 4 million units, the market is structurally tilted toward sellers. This scarcity supports price stability and growth, as demand continues to outstrip supply. Even if sales dip, the lack of homes will prevent significant price declines in most areas.

That said, new construction could offer some relief. Hale notes that newly built homes often come with builder incentives, such as slightly lower interest rates. In 2026, this trend might make new homes increasingly appealing, especially if mortgage rates hover above 6%. Builders may also ramp up production to capitalize on demand, potentially easing inventory pressures over time.

Job Growth: The Economic Backbone

Continued job growth is a cornerstone of NAR’s optimistic outlook. If the economy adds jobs at a pace similar to 2025’s 1.6 million, 2026 could see sustained housing demand. More jobs mean more first-time buyers, move-up buyers, and investors entering the market. However, this assumes economic stability. Any signs of a recession—rising unemployment, declining consumer confidence—could dampen demand and slow the market’s momentum.

Local Markets: The National Picture Doesn’t Tell All

While national trends provide a useful framework, housing markets are inherently local. In 2026, some regions might outperform the national average due to strong job growth, limited inventory, or high desirability—think tech hubs or coastal cities. Others, particularly areas with economic challenges or oversupply, could see stagnation or slight declines. Buyers and sellers must zoom in on local conditions to understand their specific market’s trajectory.

What Does This Mean for You?

Whether you’re buying, selling, or staying put, here’s how 2026’s potential trends could impact your decisions:

• For Potential Buyers: Don’t bank on major price drops, but don’t fear a runaway surge either. Monitor mortgage rates closely—further declines could signal a prime buying window. Consider new homes for possible financing perks, and shop around for the best mortgage deal, as Hale advises.
• For Sellers: A market with modest price growth and active buyers could favor sellers in 2026. Price competitively based on local data to attract interest, especially if inventory remains tight.
• For Homeowners: Steady price growth boosts equity, but real estate is a long game. Focus on long-term value rather than short-term shifts.

Conclusion

The housing market in 2026 will build on the foundation laid in 2025, with NAR’s forecast suggesting a stabilizing landscape. Modest price growth, easing mortgage rates, and continued job creation could drive a healthy—if not spectacular—market. Yet uncertainties like mortgage rate fluctuations and economic conditions will keep things dynamic.

The persistent housing shortage will likely prevent steep declines, while local variations remind us that national trends are just part of the story. For anyone navigating the market in 2026, staying informed about both local and broader economic signals will be essential to making smart moves.

Predicting the future of the housing market is never an exact science. There are so many interconnected factors at play. However, the latest forecast from the National Association of Realtors provides a valuable insight into what the experts are expecting. While a 3% price growth in 2025 might not be earth-shattering, it suggests a degree of stability and continued moderate appreciation in the housing market. As always, staying informed about your local market and understanding the broader economic trends will be key to making informed decisions.