The housing market has been a challenge for both buyers and sellers. High interest rates and low inventory have strained buyers, while sellers are finding it difficult to get their desired asking price.
According to Redfin, 28% of sellers would rather take their home off the market than take a lower price. However, things could be looking up.
“As we head into 2026, we aren’t just starting a new year; we’re entering a new era for the U.S. housing market, where home sales are set to pick up and affordability looks likely to improve,” said Lauren Hurwitz, a licensed Realtor with Compass in Westchester, N.Y., and owner/CEO of MediaHouse.
Additionally, Realtor.com’s latest report indicates a slightly more balanced market, but Americans will still face some rough patches. Here’s what to expect.
Economic and Political Risks Shaping the 2026 Housing Market
The market is expected to become more stable, but political issues and economic risks are leaving the housing market outlook fragile. According to Jake Krimmel, senior economist at Realtor.com, there are several factors at play.
- The future of the labor market and inflation outlook (unemployment just hit a 4-year high in November)
- The continuation of lower consumer confidence; uncertainty over future Federal Reserve policy, given the new incoming Fed chair in May
- Potential Federal policy changes on: trade, mortgages, housing supply
“The key wildcards for the housing market are, in my opinion, the labor market outlook, new dynamics on the Federal Reserve and the future of tariffs/trade policy,” Krimmel said.
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Signs the U.S. Housing Market Is Becoming More Balanced
Anyone who has tried to buy or sell a house over the last couple of years knows the hardships of the market, but it’s moving towards a healthier direction. Buyers have struggled with a lack of options, but inventory is estimated to increase by 8.9% nearing pre-pandemic levels, per Krimmel.
“We expect to see the most balanced housing market in a decade, with neither buyers nor sellers holding the upper hand,” he said.
Hurwitz agreed and said, “While many market conditions, like inventory levels and client demand, will vary from region to region, the data points broadly to a year of greater opportunities ahead.”
Another major hurdle holding buyers back is the high interest rates, but according to Krimmel, that’s going to change.
“Interest rates, we expect, will be lower in 2026 than in 2025, offering buyers a moderate affordability boost,” he said. “We forecast modest increases in home prices and in sales, meaning buyers and sellers are coming closer together,” he added.
Modest Improvement in Home Sales, but Lock-In Effect Persists
A modest improvement in home sales suggests more buyers and sellers are beginning to re-enter the market as conditions slowly stabilize. But the lock-in effect persists, which means many homeowners are still staying put because they’re holding ultra-low mortgage rates and don’t want to trade them for much higher ones.
Sellers can expect sales to remain low — up 1.7% year over year in 2026, to 4.13 million, per Realtor.com’s report.
“The lock-in effect will continue to be a drag on transactions because homeowners who forego moving affect both the supply and demand of housing,” Krimmel said. “Currently, 80% of mortgage holders have rates below 6%, and while we do expect that to ease in 2026, lock-in will be an important market phenomenon for years to come, not just next year,” he added.
Other things sellers will notice are buyers with greater purchasing power, the market moving in a buyer-friendly direction and no more bidding wars.
Rent Prices Are Expected To Decline in Parts of the U.S.
Renters, especially in the South and West, should see softer prices, according to Krimmel.
“The rent declines we expect to see there in 2026 are a continuation of recent trends,” he said. “Rental supply over the past several years has actually kept pace with demand and rent growth has moderated or fallen in some metros,” he added.
While conditions may improve, affordability challenges won’t disappear overnight. “High prices and the lingering lock-in effect mean sales will remain below normal,” Krimmel said. “Buyers will still need to be selective, patient and financially prepared.”
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This article originally appeared on GOBankingRates.com: Inside the 2026 Housing Forecast: What Buyers, Sellers and Renters Should Expect
