Housing Market Predictions for 2026: Affordability, Prices, and Demand

Big news for anyone watching the housing market: Redfin believes the reset of the housing market will officially kick off in 2026. This isn't about a sudden crash, but rather a slow, steady comeback where things start to feel a little more balanced. We're talking about improved affordability for buyers, thanks to incomes growing faster than home prices for the first time in a long while. Think of it as a much-needed exhale after years of soaring prices and crushing interest rates.

From my own experience observing and working within the real estate world, this prediction feels both hopeful and realistic. We've seen firsthand how difficult it's been for many, especially younger generations, to get a foot in the door. While 2026 won't be a magic bullet, it's the year Redfin sees the tide starting to turn. Let's dive into what that “reset” really means.

Housing Market Predictions for 2026: Affordability, Prices, and Demand

What Exactly is the “Great Housing Reset”?

Redfin isn't forecasting a dramatic price drop or a full-blown recession. Instead, they're pointing to a multi-year period where we'll see:

• Gradual increases in home sales: More people will be able to buy homes.
• Normalization of prices: Prices will still rise, but at a much slower, more manageable pace.
• Improving affordability: This is the key! For the first time since the Great Recession era, wages are expected to outpace home price growth over a sustained period.

This doesn't mean instant affordability for everyone, especially Gen Z and young families who will still face challenges and likely need to make compromises, like getting roommates or delaying big life decisions. But it's a significant shift from where we are now.

Prediction 1: Mortgage Rates Will Be More Manageable

One of the biggest hurdles for buyers lately has been sky-high mortgage rates. Redfin predicts that by 2026, the 30-year fixed mortgage rate will average around 6.3%. This is down from an estimated 6.6% in 2025.

Why the dip? A slightly weaker job market is expected to prompt the Federal Reserve to cut interest rates. However, don't expect rates to plummet dramatically. Lingering inflation worries and the avoidance of a recession mean the Fed will likely be cautious, keeping rates from going much lower than what financial markets have already anticipated. While we might see rates dip below 6% occasionally, it won't be for a long stretch. Even a change in Fed leadership in 2026 probably won't shake things up drastically, as long-term rates like mortgages are largely influenced by the bond market.

Prediction 2: Affordability Gets a Boost as Wages Outpace Prices

This is where the “reset” really starts to feel tangible. Redfin forecasts a modest 1% year-over-year increase in median U.S. home prices for 2026. This slow growth is attributed to persistently high mortgage rates and prices, along with a still-cooling economy, which will hold back buyer demand.

But here's the game-changer: home prices will grow slower than wages for a significant period. This is something we haven't seen since the years following the 2008 financial crisis. Combine this with slightly lower mortgage rates, and our monthly housing payments will grow slower than our paychecks.

• Why aren't prices dropping? You might wonder why prices aren't falling if demand is low. The main reason is that sellers are holding back. Most homeowners have significant equity in their homes, meaning they've gained a lot of value. This equity protects them from the risk of owing more on their mortgage than their house is worth, and with low mortgage delinquency rates, they can afford to wait for the market to recover before selling. Unlike past downturns, today's homeowners generally have good credit, ample equity, and low existing mortgage rates, reducing the pressure to sell at a loss.

This improvement will entice some buyers back into the market, but for many, especially Gen Z and young families, owning a home will still feel like a stretch.

Prediction 3: Home Sales Will See a Modest Rise

Expect existing home sales to increase by about 3% in 2026, reaching an annualized rate of 4.2 million. This increase will likely pick up steam during the spring season, especially compared to spring 2025 when mortgage rates were higher.

The sales will rise, but not dramatically, because affordability will improve just enough to pull some hesitant buyers off the fence. However, many house hunters will remain priced out, either from the cost itself or a less robust job market. Redfin notes that AI's impact on some white-collar jobs could also contribute to employment uncertainty for some Americans.

Prediction 4: Rents Are Likely to Rise Too

While buyers might see some relief, renters could face different pressures. Redfin predicts that rents will likely increase by about 2% to 3% nationwide in 2026, tracking closer to the general pace of inflation.

This rise is driven by a combination of factors:

• Slower apartment construction: The boom in new apartment buildings has slowed down.
• Increased demand for rentals: With buying still expensive, more people are choosing to rent, making apartments more competitive.

However, in some areas, like parts of South Florida and Southern California, stricter immigration policies might temper the growth in rental demand.

Prediction 5: Household Structures Will Continue to Evolve

The affordability crunch is already reshaping how we live, and Redfin expects this to continue. The predicted improvement in 2026 won't be enough to instantly boost homeownership for younger generations. We'll likely see:

• More multi-generational living: Adult children moving back in with parents, or vice-versa, will become more common.
• Friends pooling resources: More groups of friends will likely team up to buy homes together.
• Smaller families: High housing costs could continue to contribute to declining fertility rates.

Interestingly, Redfin also points to a trend in home renovations. With more families needing to accommodate multiple generations, features like separate suites for extended family are predicted to become a popular design choice. Imagine a converted garage becoming a comfortable living space for an adult child or an aging parent.

Prediction 6: Policymakers Will Address the Affordability Crisis

The widespread issue of housing affordability is a major concern for voters, and Redfin believes policymakers on both sides of the aisle will feel the pressure to act. We can expect:

• More YIMBY (Yes In My Backyard) initiatives: Efforts to streamline or permit more housing development will likely gain traction.
• Zoning reform: Changes to make it easier to build accessory dwelling units (ADUs) and home additions could be more common.
• Focus on manufactured and modular housing: Some states might explore building more of these cost-effective housing options, particularly in rural areas.

While these policy changes could gradually chip away at the affordability problem, Redfin cautions that they won't be an instant fix. The true solution, they emphasize, lies in time and the gradual alignment of wages and home prices.

Prediction 7: More Refinancing and Remodeling

With a significant portion of homeowners still having mortgage rates above 6%, Redfin anticipates a more than 30% annual increase in mortgage refinances in 2026. Many homeowners who bought recently with higher rates will be looking to lower their monthly payments.

Additionally, homeowners who've benefited from years of strong home-value appreciation have built up substantial equity. This equity can be tapped into through home equity lines of credit (HELOCs) or cash-out refinances, providing funds for renovations. For many, remodeling their current home will be a more appealing and cost-effective option than selling and buying a new one.

Prediction 8: Shifting Hotspots – NYC Outskirts and Great Lakes vs. Zoom Towns

Where will people be looking to buy? Redfin predicts a shift:

• Areas Heating Up:
  • NYC Suburbs: Long Island, Hudson Valley, Northern New Jersey, and Fairfield County, CT, are expected to attract buyers who need to commute.
  • Great Lakes Region: Cities like Syracuse, NY, Cleveland, OH, St. Louis, MO, Minneapolis, MN, and Madison, WI, are attractive due to their affordability and relative safety from climate-related events.
  • Small and Mid-sized Cities: These areas are luring graduates with affordable rents and growing blue-collar job opportunities.
• Areas Cooling Down:
  • Coastal Florida and Texas: Markets here might see homes languish due to factors like rising insurance costs from natural disasters and remote workers returning to their home offices.
  • Popular “Zoom Towns”: Places like Nashville, TN, and Austin, TX, which boomed during the pandemic, might see their appeal wane as remote work lessens and affordability becomes a bigger concern.

Prediction 9: Climate Migration Becomes Hyperlocal

As climate-related events like wildfires and hurricanes become more frequent, Redfin predicts that climate concerns will increasingly influence moving decisions. However, this migration is expected to become more “hyperlocal.”

Instead of massive moves from, say, Florida to the Midwest, people living in vulnerable neighborhoods might move to less risky areas within the same metropolitan region. This allows them to stay close to their jobs and lifestyles while reducing their exposure to climate risks. The soaring cost of homeowners insurance in high-risk areas is a significant driver of this trend. This “local climate migration” could also, unfortunately, exacerbate inequality, leaving those who can't afford to move trapped in vulnerable areas.

Prediction 10: NAR and Local MLS Consolidation

The National Association of Realtors (NAR) is expected to shift its focus. Instead of dictating rules for hundreds of local Multiple Listing Services (MLSs), NAR will step back, allowing local branches more autonomy in setting listing rules for their specific markets. This move is likely to:

• Accelerate consolidation: Smaller MLSs will merge into larger, regional ones.
• Improve data and efficiency: Larger networks can offer clearer rules, faster innovation, and cleaner data for real estate professionals and consumers alike.

Prediction 11: AI as a Real Estate Matchmaker

Artificial intelligence, especially generative AI, is set to become a powerful tool in real estate. Imagine searching for a home not just by location and price, but by specific lifestyle needs. AI could:

• Personalize home searches: Help buyers find homes that precisely match their budget, desired features, and lifestyle.
• Identify niche markets: Assist buyers looking for homes with specific wellness amenities or unique architectural styles.
• Transform agent tools: Empower real estate agents with AI-driven insights to better connect with clients and recommend the perfect properties.

My Takeaway

As someone who lives and breathes real estate, Redfin's prediction of a “Great Housing Reset” starting in 2026 resonates. It acknowledges the current affordability crisis while offering a roadmap for a more balanced future. It’s not a quick fix, but a gradual return to normalcy where homeownership becomes attainable for more people. The emphasis on wages outpacing prices, combined with slightly more manageable mortgage rates, is the critical element. While challenges remain, especially for younger buyers and renters, 2026 marks the anticipated beginning of a healthier, more sustainable housing market.