After four years of pandemic-driven extremes - frozen migration, volatile mortgage rates, major affordability challenges, and uneven supply - the U.S. housing market enters 2026 in a fundamentally different state. Redfin has dubbed it "The Great Housing Reset," and the data supports their framing. Home prices are expected to rise just 1-2% nationally, inventory is finally expanding, and affordability could begin improving for the first time since 2020.

Major Forecaster Projections

Leading housing analysts have published their 2026 outlooks:

  • Redfin: Home prices rise 1% year-over-year
  • Zillow: Home values rise 1.2%, with 4.26 million existing home sales (up 4.3%)
  • NAR: Home sales jump 14%, prices rise moderately
  • Realtor.com: Existing home sales increase less than 2% to 4.13 million
  • Fannie Mae: Mortgage rates average around 6%, possibly reaching 5.9% by year-end

The Mortgage Rate Outlook

Rates will likely remain elevated but stable:

Current rates: Low 6% range

2026 projections:

  • Zillow: Unlikely to fall below 6%
  • NAR: Average around 6%
  • Fannie Mae: 5.9% by end of 2026
  • MBA: 6.2% average for the year

The era of sub-4% mortgages is definitively over. Buyers must recalibrate expectations for a "normal" rate environment that looks nothing like 2020-2021.

Inventory Finally Improving

The biggest positive development for buyers:

Realtor.com projections:

  • Existing home inventory: +8.9% increase
  • New single-family homes: +3.1% growth
  • Total available homes: Highest since early 2020

The "lock-in effect" - homeowners refusing to sell because they'd lose their low mortgage rates - is finally weakening. Life events (divorces, job changes, growing families) are forcing sales regardless of rate differentials.

Regional Variations

The national story masks significant regional differences:

Markets expecting price declines (22 cities):

  • Mostly located in Southeast and West
  • Areas that saw biggest pandemic-era gains
  • Austin, Phoenix, Tampa Bay among vulnerable markets

Markets expecting price growth (78 cities):

  • Median expected gain: 4%
  • Northeast markets relatively strong
  • Midwest showing resilience

Affordability: The Slow Road Back

Relief is coming, but gradually:

Current challenges:

  • Median home price: ~$420,000
  • Required income for median home: ~$115,000
  • Median household income: ~$80,000
  • Affordability gap: Largest on record

2026 improvement drivers:

  • Wage growth outpacing price growth
  • Prices flattening in many markets
  • More inventory reducing bidding wars
  • Rates potentially declining slightly

Zillow notes: "Next year will mark the beginning of a long, slow recovery for the housing market."

First-Time Buyers: Still Challenged

The math remains difficult for first-time buyers:

Typical first-time buyer scenario:

  • Home price: $350,000
  • Down payment (5%): $17,500
  • Mortgage at 6.5%: ~$2,200/month (principal + interest)
  • With taxes/insurance: ~$2,800/month
  • Required gross income: ~$112,000

For many young families, homeownership remains out of reach without family assistance or dual high incomes.

What Buyers Should Do

Strategic advice for 2026 buyers:

  • Lock in current rates: Don't wait for dramatically lower rates that may not come
  • Focus on payment: Buy what you can afford today, not what you could afford at 3%
  • Consider new construction: Builders offering incentives and rate buydowns
  • Expand search areas: Remote work enables geographic flexibility
  • Plan for refinancing: If rates drop significantly, refinancing is always an option

The Bottom Line

The "Great Housing Reset" of 2026 represents a shift toward normalcy after four extraordinary years. Prices won't crash, but they won't surge either. Inventory will improve, but won't return to pre-pandemic levels. Affordability will get marginally better, but homeownership will remain challenging for many. For buyers, the reset offers a more balanced market with less competition and more choices. For sellers, expectations need recalibrating - the days of multiple above-asking offers in 48 hours are over in most markets. The 2026 housing market won't be a buyer's or seller's paradise. It will be something America hasn't seen in years: approximately normal.