The U.S. housing market is moving in the right direction, but potential buyers aren’t going to get too much relief in 2026, according to an industry expert.
Realtor.com senior economic research analyst Hannah Jones projected that inventory will continue to rise and mortgage rates will fall slightly to about 6.3%. While it’s not a significant drop, it’s still down from the average of 6.6% in 2025, highlighting how the market is getting “slightly more favorable for buyers.”
Jones quickly tempered expectations, saying the market isn’t expected to “be turning a big corner in 2026.”
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With mortgage rates falling slightly, housing payments will fall in tandem, but only about 1.3%, according to Jones. That change may not be noticeable, but Jones said it’s still a step in the right direction.
The U.S. housing market is still struggling to rebalance after years of turbulence since the COVID-19 pandemic. During the pandemic, bidding wars caused home prices to surge to record highs. Meanwhile, the dramatic rise in mortgage rates that followed made monthly payments that much more painful for homeowners. Many potential buyers who had locked in ultra-low rates before they surged decided to stay put, which hindered supply and kept prices elevated even with softer demand.
Today, even as borrowing rates fall and inventory improves in some regions, the cost of buying a home remains out of reach for many households.
There are still many buyers who don’t want to give up their lower rates. The latest figures from Realtor.com show that 52.5% of mortgages are still under 4%, 70% are under 5%, and 80% are at 6%, Jones said.
Fortunately, even with the slight changes in borrowing rates, Jones said there will be more movement in the market compared to the past two years. However, the majority of these moves are going to be households that need to make a move out of necessity.
There won’t be a landslide of movement, but in areas where home prices are more favorable, such as the West and South, Jones projected more households will take the leap.
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Home prices, Jones projected, will largely be similar to 2025. At a national level, home prices are estimated to rise about 2% in 2026.
“But of course, the picture is very, very different if you’re talking about the South and the West versus the Northeast and the Midwest,” Jones said.
For instance, inventory is as much as 50% above pre-pandemic levels in the South and the West, creating softness in home prices across a lot of metros in those parts of the country. Jones expects downward pressure on prices in those areas to continue as “new construction continues to move through the pipeline.”
On the other hand, Jones projected that there will still be upward pressure on prices in those really tight markets in the Midwest and Northeast, where inventory levels are between 30% and 50% below pre-pandemic levels.
“The Midwest and Northeast just haven’t seen that new construction activity that the South and West did during the last five years. And so that has just really limited their ability to recover and has led to more people considering…moving to different areas just so they can find a house to buy,” Jones said.
That glut of new construction is what helped markets in the South and the West recover.
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