Real estate 2026 outlook: Why the housing market could loosen up next year

Mortgage Rate and Affordability - The report forecasts mortgage rates to average 63% in 2026 and remain stable throughout the year [2][3] - Affordability is expected to improve in 2026 due to income rising faster than home prices [4] - Home prices are projected to increase by approximately 22% in 2026, which is anticipated to be slightly below inflation and income growth [4] - The current year's average mortgage rate is about 66% [4] Home Sales and Inventory - Home sales are projected to increase by 17% in 2026, reaching approximately 41 million [5] - Inventory is expected to increase by 89%, providing buyers with more options and negotiating power [7] - Home sales hit a 30-year low in 2024 [5][6] Regional Differences - The Northeast and Midwest are expected to be the strongest markets in 2026, with sales volume and prices growing due to constrained inventory [8] - The South and West are experiencing stronger inventory recovery and new construction activity, leading to more competition among sellers and more affordable prices [9] Market Factors - Uncertainty surrounding the economy is a significant factor holding back the housing market [11] - Rates and prices are factors impacting the housing market [10] Rental Market - Rents are expected to decline slightly by 1% next year [12]