For millions of Americans priced out of the housing market over the past three years, 2026 brings a glimmer of hope: economists are predicting the beginning of what Redfin calls "The Great Housing Reset"—a gradual thaw in the frozen real estate market that could finally make homeownership more attainable.
The numbers tell the story of how dire conditions became. In 2025, just 28 of every 1,000 homes changed hands—the weakest turnover rate since the 1990s. The so-called "lock-in effect," where homeowners with low-rate mortgages refused to sell, combined with soaring prices and elevated interest rates to create near-paralysis in the market.
But the fundamentals are shifting.
The Affordability Breakthrough
For the first time since 2022, buyers are projected to spend less than 30% of their income on housing payments in 2026. This threshold—long considered the definition of housing affordability—has been out of reach for most Americans since the Federal Reserve began its rate-hiking cycle.
"U.S. homebuyers will start to get some relief in 2026, with affordability improving as income growth outpaces home-price growth."
— Redfin economic analysis
The improvement comes from multiple directions. Wage growth has remained solid while home price appreciation has slowed dramatically. Mortgage rates, while still elevated by historical standards, have retreated from their 2024 peaks. The combination is gradually bringing the dream of homeownership back within reach for some buyers.
What the Numbers Show
The major real estate forecasters have aligned on a modestly optimistic outlook:
- Home prices: Expected to rise about 2% nationally—a far cry from the double-digit appreciation of 2020-2022
- Existing home sales: Projected to increase 2-3% (Realtor.com predicts 1.7%, Redfin projects 3%)
- Mortgage rates: Expected to average 6.3% for the year, down from 6.6% in 2025
These aren't dramatic improvements, but they represent a meaningful shift in momentum after years of deterioration.
Regional Divergence Deepens
Perhaps the most striking trend is the geographic rebalancing of the housing market. For years, Sun Belt metros dominated the "hot markets" lists. Now, Northeastern and Midwestern cities are taking over.
Realtor.com's top housing markets for 2026 are:
- Hartford, Connecticut
- Rochester, New York
- Worcester, Massachusetts
This represents a complete reversal from a year ago, when the top 10 were exclusively in the South and West. The shift reflects several factors: pandemic-era migration has slowed, insurance costs are climbing in coastal and fire-prone areas, and the relative affordability of Rust Belt metros is attracting fresh interest.
Supply Dynamics by Region
The regional divide extends to new construction. In the South and West, a surge of new home building is softening prices. In the Northeast and Midwest, limited new construction means less competition for existing homes—and faster price appreciation.
For buyers, this suggests opportunity in overlooked markets. Cities like Hartford and Rochester offer median home prices well below the national average, with job markets that have quietly strengthened as remote work enables geographic flexibility.
The Fed Factor
Much of the housing market's trajectory depends on Federal Reserve policy. The current 30-year mortgage rate of around 6.15%—according to Freddie Mac data—reflects expectations of limited Fed rate cuts in 2026.
The Fed has signaled it plans just one additional rate cut this year, keeping rates higher than many buyers hoped. However, even modest declines in mortgage rates can significantly impact affordability. A 0.5 percentage point drop translates to roughly $100 less per month on a median-priced home—meaningful savings that compound over the life of a 30-year mortgage.
The Rental Pressure Relief Valve
There's a silver lining for those who remain renters: the same construction boom softening home prices in many markets is adding rental inventory as well. Rent growth has moderated significantly from its pandemic-era peaks, and in some markets, concessions and incentives are returning.
This creates optionality for households: those who can't yet afford to buy may find renting increasingly attractive, while those ready to purchase face less pressure to rush into ownership.
What Buyers Should Consider
For those weighing a 2026 home purchase, economists suggest the following framework:
- Don't wait for dramatically lower rates: The Fed's guidance suggests rates will remain elevated through 2026
- Consider overlooked markets: The Midwest and Northeast offer relative value
- Factor in total costs: Insurance and property tax trends vary significantly by region
- Stay flexible on timeline: Inventory is expected to improve gradually, rewarding patient buyers
The Long View
Economists are quick to caution that 2026 represents the beginning of recovery, not its completion. The housing market's structural challenges—underbuilding for over a decade, demographic pressure from millennials entering prime homebuying years, and the wealth-preserving behavior of existing homeowners—won't resolve quickly.
"This year will mark the beginning of a long, slow recovery for the housing market."
— Market economists
But for buyers who have spent years on the sidelines, the direction of travel finally appears favorable. The "Great Reset" won't deliver instant affordability—but it may deliver something equally valuable: momentum in the right direction.
For the first time in years, the math is slowly, incrementally, starting to work again.
