Six Housing Predictions from Windermere’s Economist
After several years of uncertainty, the housing market is entering 2026 on more stable footing—but not without constraints. While a dramatic rebound remains unlikely, the data points to a year of gradual normalization across sales, prices, inventory, and financing conditions. Here are six key predictions shaping the outlook for 2026. If you prefer to watch the video, click here.
1. Existing Home Sales Will Pick Up—But Only Modestly
Existing home sales have remained near generational lows for nearly three years. A major rebound is unlikely, but conditions are improving enough to support a small increase in activity. Inventory is higher than it has been since 2019, and mortgage rates are lower than they were throughout most of 2022 and 2023. Together, these shifts should coax some buyers and sellers back into the market—though affordability challenges will keep the pace restrained.
2. Home Prices Will Remain Roughly Flat
Home price growth is expected to stall in 2026. Rising inventory is putting downward pressure on prices, and national indices already showed modest declines during parts of 2025 before stabilizing. At the same time, sellers have been remarkably disciplined—often pulling listings or delaying sales when pricing expectations aren’t met. That behavior has helped prevent sharper price drops, resulting in a market where prices are likely to hold steady rather than rise or fall significantly.
3. Inventory Will Return to Pre-Pandemic Levels
Housing supply is on track to normalize. By 2026—possibly as early as spring—inventory could return to levels last seen before the pandemic. Beyond homes already on the market, a sizable “shadow supply” remains, made up of owners waiting for better conditions before selling. Many of these discretionary sellers will test the market cautiously, extending time on market and increasing total listings. For buyers, that means more choices and greater negotiating leverage.
4. The Homeownership Rate Will Decline Slightly
Despite improved inventory, affordability remains a major barrier. At today’s prices and interest rates, many middle-income households who would have purchased in prior cycles are staying on the sidelines. Slower rent growth has reduced urgency, while the rise of single-family rentals allows households to enjoy space and lifestyle benefits without committing to ownership. These dynamics are expected to push the overall homeownership rate modestly lower in 2026.
5. Mortgage Rates Will Drift Slightly Lower
Mortgage rates are likely to remain below 6.25% for most of 2026, with brief dips under 6% possible. Federal Reserve rate cuts, slower economic growth, and a normalization of the spread between Treasury yields and mortgage rates are all contributing factors. However, much of this improvement is already priced in, meaning borrowers should expect incremental relief rather than a return to ultra-low rates.
6. A Recession Will Be Avoided
Despite multiple economic shocks in 2025, the U.S. economy appears positioned to avoid a recession in 2026. Payroll growth has slowed, but largely due to labor supply constraints rather than weak demand. Unemployment claims remain stable, and corporate earnings rebounded after early trade policy disruptions. As tariff pressures eased through court rulings and revised trade agreements, economic momentum stabilized—supporting continued, if modest, growth.
Final Takeaway
2026 is shaping up to be a year of normalization, not acceleration. Buyers will benefit from more inventory and slightly better financing conditions, while sellers will need to price more realistically. The broader economy appears steady enough to support housing activity—but without the tailwinds that drove previous booms.
