Housing Market Forecast: Will Home Prices Fall in 2026?
Will the new year bring much-needed relief to weary consumers?
As of 2023, frustrated buyers have been struggling with high mortgage rates, limited inventory and high home prices — factors that have created the unaffordability crisis. According to information presented during the recent conference of the National Association of Realtors (NAR).prices have fallen 27% to 80%, depending on the market, over the past five years.
Combined with mortgage rates reaching 7% in the past two years, it’s no wonder buyers have been sticker shocked. However, there is cause for muted optimism for 2026, as both loan rates and price pressures are expected to ease.
Kara Ng, senior economist at Zillow, says 2026 will be a positive — albeit small — step toward reviving the housing market. Potential buyers can expect an overall improvement in home buying conditions.
“If I could give the housing market of 2025 a grade, I would give it a C,” said Ng. “What we expect in 2026 is like C-plus.”
Why home prices will become more affordable in 2026
Most housing economists are predicting a modest increase in home prices of 1% to 2%. The light MLS is at a low with a price increase of 0.9%, while the NAR is at a high of 4%.
You may wonder how rising prices translate into improved affordability. There is an important difference here. All forecasts are for standard prices without adjustments for other factors, such as inflation.
Of course prices, on the other hand, account for effects such as wage growth and inflation and closely represent the consumer’s purchasing power. That’s why analysts like Danielle Hale, chief economist at Realtor.com, are predicting a 2.2% price increase next year and still expect real prices to drop.
The reason, Hale explains, is that incomes are expected to grow next year by 3.6%, while inflation is expected to be around 3% – both higher than the expected increase in home prices. With more money available and slower price growth for housing compared to other goods and services, “those monthly payments are going to come down as we go into 2026,” he says.
However, Lisa Sturtevant, chief economist at Bright MLS, points out that there will be significant regional differences.
“There are markets where things are still tight, where housing prices are still going up,” said Sturtevant. “Then there are… other markets where inventory has exceeded 2019 levels, and we’re seeing prices start to come down.”
Housing inventory continues to improve
Affordability will also benefit from an ever-improving housing supply. After hitting a low in early 2022, real estate prices have been steadily increasing. According to the NAR, there is a 4.4-month supply of homes on the market as of November, which means that if homes are sold at their current pace, the supply will run out in more than four months.
That inventory is predicted to continue rising through 2026 by nearly 10% according to both Realtor.com and Bright MLS. The rise will be due to a combination of new listings entering the market and homes listed taking longer to sell.
Regardless of how the new supply comes about, more innovation is good for the market. More available homes help reduce competition for buyers and can also help keep price growth high, improving affordability for prospective homebuyers.
In general, expect markets in the Northeast and West Coast to have limited inventory and more buyer competition, resulting in slightly higher prices. Meanwhile, markets in the Midwest and South will have a large supply of real estate and low price growth.
Although real estate experts are generally optimistic about improving conditions next year, there are storms that can upset even the most accurately calculated forecast. An increase in job weakness and consumer prices, for example, could lead to continued homebuyers – and dampen any improvement in the market.
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