Economists at Zillow expect greater stability in the housing market by 2026, alongside a noticeable improvement in affordability and evolving lifestyle patterns that Americans are seeking to adopt.
After a year of gradual improvement for homebuyers—marked by slight gains in affordability and favorable conditions in 19 major metropolitan areas—a modest rise in home prices and a moderate increase in sales are on the horizon as mortgage rates stabilize above 6%. While some apartment renters may see a slight improvement in housing costs, the situation will be different for New York residents, who are not expected to experience any meaningful improvement.
According to Misha Fisher, Chief Economist at Zillow, the housing market has begun to enter a phase of relative stability as both sellers and buyers gradually return to the market. Consumers are benefiting from improvements in supply and affordability, while sellers are seeing steadier prices and more consistent demand. These conditions strengthen the prospects for growth for both sides during 2026.
Slight Increase in Home Prices Expected in the 2026 Housing Market
Zillow’s economic forecasts indicate that U.S. home prices will rise modestly by 1.2% in 2026, reflecting the price stability that was widely observed in 2025. This points to a gradual improvement in affordability driven by sustained buyer demand and a slight easing in mortgage costs. This small adjustment in interest rates is expected to enable more buyers to enter the market, supporting reasonable price growth across many regions.
Reduced Financial Pressure on Homeowners
With the expected recovery in home prices in major markets, there will be a noticeable decline in the number of homeowners whose property values fall below their purchase prices. Compared to 2025, when 24 major markets recorded significant declines, Zillow expects this figure to be cut nearly in half next year, settling at around 12 markets. This financial stability reflects stronger home equity for property owners rather than ongoing losses.
Mortgage Rates to Remain Above 6%
Although forecasting future interest rates remains a major challenge even for experts, Zillow confirms that mortgage rates will stay above the 6% threshold throughout 2026, particularly as inflation continues to affect borrowing costs. Despite gradual improvements in favor of borrowers and better affordability in recent years, a return to the ultra-low interest rates seen during the pandemic is unlikely.
Slight Increase Expected in Existing Home Sales
Zillow estimates that sales of existing homes will rise by 4.3%, reaching a total of 4.26 million units sold in 2026. This rebound reflects growing demand resulting from years of limited supply and high housing finance costs. With recent improvements continuing, this spring could create an opportunity for a strong real estate season, benefiting from long-suppressed demand.
Decline in New Construction Activity
On the other hand, the new construction sector appears set for a challenging year in 2026, with forecasts suggesting it will be the slowest year for single-family home construction since 2019. With an ample inventory of completed or already under-construction housing units, builders are expected to hold back from launching large-scale new projects.
According to the latest August figures, single-family housing starts fell by 5% compared with last year. With an additional decline of 2% expected in 2026, the number of new units under construction could drop below 947,000, its lowest level since the start of the pandemic. To offset the market slowdown and stimulate inventory movement, developers are expected to continue offering incentives.
