Core Insights - Mortgage rates are projected to remain above 6% through 2026, with Zillow predicting they will not dip below this threshold next year despite some gradual easing [1][2] - Zillow's forecast indicates that U.S. home values will increase modestly by 1.2% in 2026, supported by improving affordability and steady buyer demand [3] - Existing home sales are expected to rise to 4.26 million in 2026, reflecting a 4.3% increase from 2025 due to pent-up demand and improved affordability [5] Mortgage Rates - Zillow acknowledges the difficulty in forecasting mortgage rates a year in advance, but emphasizes its successful track record in predicting shelter inflation, which influences mortgage rates [2] - Borrowers experienced some relief in 2025, leading to improved affordability, which is anticipated to continue into 2026 [2] Home Values - The number of major markets experiencing annual price declines is expected to decrease from 24 to 12 in 2026, indicating stabilizing home values [4] - Stabilizing prices will allow more homeowners to build equity rather than lose it, reducing the number of owners whose home values fall below their purchase price [4] Existing Home Sales - The housing market is projected to settle into a healthier state in 2026, providing buyers with more options and sellers with price stability [6] - A stronger-than-expected fall season in 2025 suggests potential for increased activity in the spring of 2026 if affordability improvements persist [5] New Construction - 2026 is anticipated to be the slowest year for single-family home construction starts since 2019, with builders likely to hold back on new projects due to an existing stock of homes [7] - Single-family starts were already trending 5% below 2024 levels as of August 2025, with a further 2% decline expected in 2026 [7]
Mortgage Rates Will Stay Above 6% in 2026, Zillow Predicts