The American housing market is about to enter a new era. According to Redfin's comprehensive 2026 forecast, the relentless appreciation that locked millions of would-be buyers out of homeownership is finally giving way to what the real estate giant calls "The Great Housing Reset"—a multi-year period of gradual normalization that begins this year.

This isn't a crash, and it isn't a boom. It's something potentially more significant: the first sustained period in which ordinary wage growth outpaces home price growth since the aftermath of the 2008 financial crisis. For Americans who have watched homeownership slip further out of reach with each passing year, the reset offers a pathway—albeit a long one—back to affordability.

What the Reset Actually Means

The "Great Housing Reset" isn't a price correction or recession scenario. Instead, it's a yearslong period of gradual increases in home sales and normalization of prices as affordability slowly improves. The core dynamic: incomes rising faster than home prices for a sustained period.

Key projections from Redfin's forecast:

  • Home prices: The median U.S. home-sale price is expected to rise just 1% year-over-year in 2026—essentially flat in real terms after adjusting for inflation.
  • Mortgage rates: The 30-year fixed rate will average 6.3% for the year, down from 6.6% in 2025. Rates may occasionally dip below 6% but won't stay there for meaningful periods.
  • Home sales: Transaction volume is forecast to increase 3% to an annualized rate of 4.2 million, with a stronger spring buying season expected.
  • Timeline: Redfin estimates it will take approximately five years for the housing market to return to normal, as prices soared much faster than earnings during the pandemic.

Why 2026 Is the Turning Point

Several factors are converging to make this year the inflection point that housing analysts have been anticipating:

The Lock-In Effect Is Fading: Millions of homeowners who locked in sub-4% mortgage rates during 2020-2021 have been reluctant to sell, knowing they'd face much higher rates on their next purchase. But life events—job changes, divorces, growing families, aging parents—are forcing more of these owners to move despite the rate penalty. Inventory is slowly improving as a result.

Builders Are Adjusting: After initially pulling back in response to higher rates, homebuilders have adapted their product mix. More starter homes and townhouses are coming to market at price points that first-time buyers can actually afford. Builder incentives, including rate buydowns and closing cost assistance, are making new construction increasingly competitive with resale homes.

Wage Growth Is Holding: While the labor market has cooled, wage growth has proven resilient. Workers continue to see pay increases that, for the first time in years, are outpacing home price appreciation in many markets.

"The bottom line for 2026 is that it will be a transitional year," according to Redfin's analysis. "There won't be a crash or a boom, just the market finding its footing after years of extraordinary disruption. Buyers will have more selection and negotiating power than at any time since the pandemic."

The Geographic Divide

The reset won't unfold uniformly across the country. Regional differences are becoming more pronounced:

Markets Poised to Strengthen:

  • New York City suburbs (Long Island, Hudson Valley, northern New Jersey, Fairfield County) will benefit as more workers return to offices
  • Midwest and Great Lakes cities (Syracuse, Cleveland, St. Louis, Minneapolis, Madison) will attract buyers seeking affordability and relative safety from climate disasters
  • Northeast and Midwest markets overall, where there's less newly built housing and prices have been more stable

Markets Expected to Cool:

  • Former pandemic boom towns including Nashville, Austin, and San Antonio will see homes languish on the market as the remote-work migration slows
  • Coastal Florida cities (Fort Lauderdale, West Palm Beach, Miami) face headwinds from soaring insurance costs and climate risk concerns
  • Southern and Western markets generally, where significant new construction has increased supply

The Affordability Equation

Even with the reset underway, housing affordability remains challenging by historical standards. Consider the math for a median-priced home:

  • Median home price: Approximately $420,000
  • 20% down payment: $84,000
  • Monthly mortgage payment at 6.3%: Approximately $2,080 (principal and interest only)
  • Income needed to qualify: Roughly $120,000 annually

These numbers explain why the reset will take years rather than months. The gap between current prices and what typical incomes can support is simply too large to close quickly without a price crash—which isn't in the forecast.

The Rental Wild Card

One often-overlooked factor in the housing equation is the rental market. Redfin expects demand for apartments to rise as rental supply falls in 2026, leading to rising rents in many metro areas. Nationwide, rents are projected to rise 2% to 3% year-over-year by year-end.

Rising rents could accelerate the incentive to buy for those who can qualify, even at today's elevated prices. When rent checks grow larger each year, the calculus for continuing to wait for perfect buying conditions changes.

Lifestyle Implications

Perhaps the most striking aspect of Redfin's forecast concerns the lifestyle adjustments Americans are making in response to housing costs:

  • Multi-generational living: More adult children are living with parents, and more parents are moving in with adult children. The nuclear family household is becoming less common.
  • Co-buying arrangements: Friends are pooling resources to purchase homes together, often with prenuptial-style agreements governing ownership stakes and exit scenarios.
  • Delayed family formation: High housing costs are leading some couples to postpone having children until they can afford adequate space.
  • Geographic flexibility: Remote work options are enabling more workers to move to lower-cost markets, even if it means living farther from family and friends.

Gen Z and millennial homeownership rates flatlined in 2025, and Redfin expects that trend to continue. The generational wealth gap—with younger Americans shut out of the asset appreciation that previous generations enjoyed—is becoming a defining economic issue.

What Buyers Should Do

For prospective homebuyers, the Great Housing Reset offers both opportunity and complexity. Some strategic considerations:

  • Don't wait for the bottom: The reset is gradual, not a crash. Waiting for dramatically lower prices may mean waiting forever.
  • Focus on monthly payment: With rates expected to remain elevated, the purchase price matters less than the combination of price, rate, and terms you can secure.
  • Consider new construction: Builder incentives often make new homes more affordable than equivalent resales, despite higher sticker prices.
  • Think regional: Markets where prices are expected to soften offer better opportunities than those still appreciating.
  • Build savings aggressively: Down payment and closing costs remain the biggest barrier for most buyers. Maximizing savings rate is the single most important preparation.

The Bottom Line

The Great Housing Reset represents a fundamental shift in America's housing market—the transition from a seller's paradise to something approaching equilibrium. It won't happen overnight; Redfin estimates five years before normal conditions return. But for the millions of Americans who have watched homeownership slip away over the past half-decade, 2026 marks the beginning of a more hopeful trajectory. The question isn't whether affordability will improve, but whether individual buyers can position themselves to take advantage when it does.