For more than three years, it’s been sad to be a home buyer. But in 2026, things might get a little easier.
Housing affordability is on track to improve next year as mortgage rates fall slightly and home price appreciation slows. Those conditions — if they hold — could bring more buyers and sellers off the sidelines and into the market during the traditionally busy spring home-buying season, and help home sales post their first significant gain since collapsing in 2023 to levels not seen since the mid-1990s.
Ultimately, improved affordability next year will likely be the first step in a longer period of market normalization, say economists and experts who spoke to Yahoo Finance. Given how aggressively mortgage prices and rates have risen in recent years, many buyers will be left out of the market.
“It’s really just the beginning of a long process,” said Chen Zhao, head of economic research at brokerage Redfin. “For a lot of people, they still won’t necessarily be able to get into the housing market.”
Read more: Is now a good time to buy a house?
When many people think of scenarios that would make homes more affordable, what often comes to mind are events like the global financial crisis, which caused US home prices to drop an average of 27% between 2006 and 2012.
That’s not on deck for 2026.
While home prices are likely to fall on average next year, few housing experts expect a crash because the country still has a housing shortage.
Instead, most affordability gains will likely come from slightly lower mortgage rates and a rate of home price appreciation that falls below average wage growth.
Many economists forecast only modest home price increases of 1 percent to 3 percent next year. That gives incomes, which have grown in the 3% to 4% range annually, a chance to outpace home price appreciation for the first time in years. Home prices are also declining in some markets, particularly in parts of the Southeast and Mountain West.
Lower mortgage rates would also help affordability and is a real possibility. Rates have hovered around 6.2% in recent months, and many economists expect them to average somewhere in the low 6% range next year. This is down from this year’s average of around 6.6%.
“Over the course of the year, there will be an improvement,” said Danielle Hale, chief economist at Realtor.com. “We expect monthly payments to be slightly lower for the first time in five years.”
Even relatively small drops in mortgage rates can translate into significant changes in monthly payments. A homeowner with a $320,000 mortgage at 6.8 percent — where rates were at the beginning of the year — would pay about $2,086 a month on the loan. At 6.2% — where rates are now — it would pay $1,960.
“There’s a lot more activity the closer we get to 6 percent,” said Mike Simonsen, chief economist at real estate brokerage Compass.
More inventory can help stimulate the market by giving buyers more options to choose from. Inventory for sale has improved this year, and most economists predict another jump next year, especially as sellers who tried and failed to market their homes in 2025 do so again in the spring.
According to Simonsen’s estimates, about 150,000 sellers tried to sell their homes this year but gave up. Many will likely return this spring if rates stay lower, helping to improve both the level of inventory for sale and the size of the pool of buyers if they move, he said.
Read more: When will mortgage rates drop to 6% again?
Huntsville Park, Alabama, USA and downtown at dusk. ·Sean Pavone via Getty Images
In Huntsville, Ala., home price appreciation has been relatively muted in recent years amid a flurry of new construction activity, said Steve Stinson, a broker associate at Keller Williams Realty in the city. Slower growth has caught some sellers out trying to top the dollar this year. He expects many will return in the spring with more realistic price expectations.
“I think sellers will have a better understanding of the market in the coming year,” Stinson said. “This year felt like a ‘Let’s put it out there and see what happens’ kind of year.
Huntsville, which has been growing rapidly but also adding new homes quickly, has been a market that has been slightly tilted toward sellers in recent years, Stinson said. But many other cities in the Southeast have seen buyers get energized as housing supply outstrips demand, while sellers remain in control in much of the Northeast and Midwest.
Regional differences, which are largely explained by new construction and buyers migrating in search of better affordability, have kept home prices rising rapidly in many cities in the Northeast and Midwest and pushed prices down in markets like Denver and Phoenix, as well as Texas and Florida.
That bifurcation won’t change much next year.
Realtor.com sees cities like Hartford, Conn., Rochester, N.Y., and Grand Rapids, Mich., leading the nation in metrics like price appreciation and home sales, while those measures are more likely to decline in many Florida markets.
Redfin, meanwhile, sees the suburbs of New York City, Syracuse, NY and Cleveland as the most likely to warm in 2026, while markets such as Nashville, Tennessee, coastal Florida and parts of Texas could continue to cool.
However, some markets that have cooled in recent years could be headed for more stable prices next year. Zillow expects home values to fall in just 12 of the nation’s 50 largest metro areas next year, down from 24 this year.
In Chicago’s western suburbs, home prices continued to rise in 2025 amid steady demand from buyers looking for more space but an easy commute to the city via public transportation, said Brandon Blankenship, a realtor with Keller Williams Premiere Properties in Wheaton, Illinois.
“As we’ve gone through this pandemic situation, things have started to calm down, but prices have continued to rise,” Blankenship said. “I think the market is going to be very strong next year, especially if rates go in the right direction.”
Claire Boston is a senior reporter for Yahoo Finance covering housing, mortgages and home insurance.
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