What will next year’s housing market look like?

Thinking about buying or selling a house in 2026? If so, you are likely wondering how the housing market will shape up in the new year — and whether it will offer more favorable conditions than this year did.

The news is good, but not great. In 2026, “it won’t be a quick price correction, and it won’t be a recession,” said real estate company Redfin in its annual predictions. Instead, the “Great Housing Reset will be a yearslong period of gradual increases in home sales and normalization of prices as affordability gradually improves.”

Will mortgage rates come down?

Most experts expect mortgage rates to “stay elevated and relatively steady” in 2026, said Experian. There are two dueling forces at work here keeping rates roughly where they are: the first is persistent inflation, which could prevent “borrowing costs from falling much next year,” and the second is a “weakening job market and geopolitical tensions,” which “may make it less likely that mortgage rates will skyrocket again.”

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To get more specific, one economist estimates that mortgage rates will “average around 6% in 2026, down from a roughly 6.7% overall average for this year,” said Realtor.com. Buyers looking for a better decrease than that should note that mortgage rates are “unlikely to return to the 3% level seen during the COVID-19 pandemic.”

Where will home prices head?

In 2026, home prices will probably continue to inch up overall, though at a slower pace than in previous years, when homebuyers experienced an affordability crunch. While exact projections vary depending on the source, per Redfin’s estimates, “prices are expected to increase around 1% year-over-year in 2026, compared to a 2% increase in 2025,” said Business Insider.

It is also worth noting that the “level of improvement really depends on where you live,” said NerdWallet. Some markets are likely to see prices dropping off at a more accelerated rate, while others will experience a faster pickup in prices.

Could inventory improve?

Due to “persistently high mortgage rates and home prices, inventory still hasn’t returned to pre-pandemic levels,” said Experian, citing data from the Federal Reserve Bank of St. Louis. Still, inventory has been slowly but steadily improving — and it may “continue to grow modestly in 2026, with growth predictions ranging from 5% to 10%.”

Home sales may tick up as well, but “only slightly, because affordability will improve just enough to lure some on-the-fence buyers,” said Redfin. Meanwhile, “many house hunters will remain priced out and/or limited by a stalled labor market.”