2026 Housing Market Outlook: Mortgage Rates & Home Price Predictions

What Zillow’s 2026 Housing Market Forecast Means for You

The 2026 housing market is shaping up to be calmer, more predictable, and slightly more affordable than the last few roller‑coaster years. For both buyers and sellers, that means less drama and more room to make thoughtful decisions instead of rushed ones.

Modest Price Growth, Not a Boom

Zillow expects U.S. home values to rise only modestly in 2026, with prices forecast to grow around 1.2% after a mostly flat 2025. That kind of slow, steady growth suggests a market that is stabilizing rather than overheating, which can be good news for buyers and existing homeowners alike.

In 2025, nearly half of the largest U.S. markets saw some degree of price decline, but that picture is expected to improve. Zillow projects that the number of major metros with annual price drops will shrink from 24 to about 12 in 2026, reducing the risk of negative equity for many owners.

Mortgage Rates: Relief, But Not the Pandemic Lows

One of the biggest questions heading into 2026 is where mortgage rates will land. Forecasts suggest that rates are likely to remain above 6%, even as they drift down from the peaks seen in 2023–2024. That means the ultralow pandemic‑era rates are unlikely to return soon, but buyers should feel a bit more relief than in recent years as borrowing costs gradually ease.

Instead of waiting for a perfect rate that may never appear, the smarter move for buyers will be to focus on the overall payment: timing, home choice, and strong negotiation on price and concessions. For many, the opportunity will be to get into a home in a more balanced market and look at refinancing later if rates improve.

Sales Activity Ticks Up While Construction Slows

Zillow’s forecast calls for roughly 4.26 million existing home sales in 2026, which represents about a 4.3% increase over 2025. That bump suggests some of the pent‑up demand from would‑be movers—people who delayed selling or buying due to high rates and limited options—is finally starting to be released.

On the new‑construction side, though, 2026 is expected to be the slowest year for single‑family housing starts since before the pandemic. Builders are pulling back and leaning heavily on incentives like rate buydowns and closing‑cost assistance to keep the homes they do have under contract. Those incentives can shape local pricing and buyer expectations, especially when resale homes must compete with attractive builder offers.

Affordability, Features, and Today’s Cost‑Conscious Buyer

Even with modest price growth, affordability is projected to gradually improve as incomes catch up and rate pressure eases. Many buyers and renters are prioritizing homes that stretch their monthly budget further, which puts a spotlight on energy efficiency, smart storage, and layouts that reduce ongoing costs.

Features such as energy‑efficient systems, good insulation, and flexible spaces that can double as offices or guest areas are gaining traction. Highlighting these elements in listing photos, descriptions, and tours can help a property stand out to budget‑sensitive buyers who are looking beyond just the sticker price.

The Rise of the “Lifestyle Renter”

Not everyone in 2026 will be racing toward homeownership. A growing share of renters are choosing to rent for lifestyle reasons—prioritizing flexibility, amenities, and predictable monthly costs over the commitment of owning. These renters may not be in a hurry to buy, but they are open to homeownership if it clearly supports their long‑term financial and lifestyle plans.

For those who expect to stay put for several years, the 2026 market may offer a middle ground: less competition than the frenzy years, gentle price growth, and the potential to convert their largest expense—housing—into an asset that builds equity over time.