Housing Market Predictions: Will Home Prices Drop in 2026?

The 2025 housing market has been a mixed bag. Mortgage rates, though down from their 2023 highs near 8%, remain elevated enough to squeeze affordability. Home prices have stayed stubbornly high despite forecasts of a cooldown, while inventory has improved slightly but remains tight in many areas.

As the year winds down, many are looking ahead to what’s next. Will prices finally ease, or will limited supply keep the pressure on? To get a clearer picture, we gathered expert housing market predictions for 2026 to explore what buyers and sellers can expect in the year ahead.

In this article (Skip to...)

• Current housing market overview
• Will housing prices drop in 2026?
• Will housing inventory increase?
• Will 2026 be a buyer’s or seller’s market?
• Will the housing market crash?
• The bottom line

National housing market trends and stats

Here’s a quick snapshot of the latest real estate market numbers at the time of this writing, per the freshest data from the National Association of Realtors, Redfin, and The Mortgage Reports:

• $422,600 – median existing-home sales price (up 2.0% year-over-year)
• 4.0 million – seasonally adjusted annual rate of existing home sales (up 1.8% year-over-year)
• 1.53 million (4.6 months’ supply) – inventory of unsold existing homes (up 0.4% year-over-year)
• 47 days – average number of days existing homes remained on the market in August (up 8 days from a year ago)
• 27.0% – share of homes selling above list price (down 3.2 points a year ago)
• 20.6% – share of homes that had price drops (up from 17.0% one year ago)
• 6.359% – average conventional 30-year fixed mortgage rate in early October.

Current housing market overview

Of course, numbers only tell part of the story. To put today’s housing market into a better context – how we got here, where things stand now, and what may be coming next with home prices, inventory, and buyer versus seller leverage – let’s take a closer look at what the industry insiders have to say.

Nadia Evangelou, senior economist and director of real estate research, National Association of Realtors: “2025 was another year of a sluggish housing market. Sales activity did not pick up as much as we anticipated earlier this year, even though inventory has been rising and offering buyers more options. Affordability remains the market’s main challenge. Even with more homes available, many are still priced out of reach for the typical buyer, which continues to hold back overall activity.”

Kenon Chen, executive vice president, Strategy and Growth, Clear Capital: “The housing market is currently entering a period of transition. There have been encouraging signs of improvement in affordability with the recent reduction of mortgage rates and a slowing of home price appreciation nationally. However, affordability remains a challenge since a mortgage payment on a median home still consumes over 30% of a median income.”

Albert L. Lord III, founder/CEO, Lexerd Capital Management: “The U.S. housing market is stabilizing after the post-pandemic surge. Prices remain near record highs, with modest year-over-year gains, while sales volumes are subdued due to affordability pressures. We got to this point based on the combination of the Federal Reserve tightening from 2022 to 2024, which pushed mortgage rates to multi-decade highs; a persistent structural housing shortage stemming from underbuilding since the Great Financial Crisis of 2008; and the benefits of homeowners staying put.”

Ralph DiBugnara, president of Home Qualified: “The approach through 2025 toward the housing market has seemed to be wait and see. It has slowed, with affordability becoming the main issue. House prices have not come down enough to meet the return to normalcy of interest rates. Because of a housing shortage and spike in prices over the last 5 years, homes have become much less affordable. That combination and inflation driving up the costs of living has caused buyers to take a very cautious approach. On the other side, sellers are hanging onto their homes with massive amounts of equity due to a lack of affordable options to live elsewhere.”

Steven Glick, director of mortgage sales for HomeAbroad: “As we close out 2025, I’d call the housing market cautiously stable: no boom, no collapse. Sales are modest, prices are inching up, and inventory is gradually loosening, but affordability is still tight.”

Martin Orefice, founder, Rent To Own Labs: “This is a housing market defined by uncertainty, high prices, and low inventory. In some ways, this has been brewing for decades. You could look all the way back to 2008 and its impacts on home construction. Inflation is rising, immigration enforcement and tariffs are driving up costs, and falling interest rates may not be enough to counteract those forces.”

Together, these perspectives paint a picture of a market in transition, steadying but still constrained by affordability, setting the stage for housing market predictions for 2026.

Will housing prices drop in 2026?

What home seekers and prospective sellers alike really want to know is where home prices will land in 2026. Here’s a roundup of answers to that question.

Rick Sharga, president/CEO of CJ Patrick Company: “Nationally, home prices will probably rise modestly in 2026, by less than 2% unless market conditions change dramatically. But the numbers are likely to be very different from state to state and market to market, with states in the South and West likely to see small price declines, while markets in the Midwest and Northeast will continue to see prices rise.”

Baruch Mann, CEO of The Smart Investor: “Average home prices will likely stay roughly the same in 2026, with the possibility of a minor decrease of 2% to 5%. Prices are already high, and with unemployment showing signs of rising, recession concerns, and interest rates remaining elevated, demand is expected to soften.”

Zev Freidus, president of ZFC Real Estate: “I expect a modest national increase of about 2% to 3% for 2026, with the pace a bit stronger in the second half as rates drift lower and more sellers return. Because there still aren’t enough homes for sale in many cities, prices aren’t likely to drop much.”

Evangelou: “I expect the national median home price to increase by about 4% in 2026, with most of the gains likely to occur in the spring and summer season. In dollar terms, that’s roughly $17,000 on a $420,000 national median price. Affordability will remain a challenge, but it should improve as mortgage rates ease further and incomes continue to grow faster than home prices. That combination will allow more buyers to re-enter the market.”

DiBugnara: “Interest rates should be down on average in 2026. If that happens, we will see much more activity from buyers and sellers, and I see home prices rising anywhere between 5% and 8% through 2026.”

Orefice: “On a nationwide level, I expect home prices to drop by up to 10% over the next year or so. There just aren’t enough buyers in the market to support current home values.”

Chen: “Average home prices will continue to moderate throughout the rest of the year. Home price appreciation was 1.1% quarter-over-quarter in August, down from 1.7% in July, according to the Clear Capital HDI Market Report.”

Taken together, these housing market predictions for 2026 suggest that home prices will remain resilient overall, with only minor regional fluctuations expected.

Will housing inventory increase?

When it comes to housing supply, housing market predictions for 2026 are somewhat bullish, anticipating a modest rise in available homes as conditions improve.

Glick: “I expect modest growth in inventory over 2026 – maybe up 5% to 10% – in active listings by year’s end. Two forces are at work: Homeowners who are locked into low rates will begin listing when they feel rates are tolerable again, and builders will continue to complete homes. The trend of rising listings – 22 months straight of growth in active listings – suggests supply is loosening gradually, though it won’t jump to overabundance.”

Lord: “Inventory will increase moderately in 2026, likely in the range of 6% to 7% growth. New construction, though not at peak levels, will add fresh supply. Most gains are expected mid-year, with quarters three and four in 2026 showing stronger improvements. However, the increase will not fully resolve the long-term housing shortage, and affordability will still be an issue.”

Chen: “After available inventory hit a high point in July, we have seen the trend decrease through to September. If mortgage rates continue to move downward, inventory will likely stay similar or even decrease on average in 2026.”

Sharga: “Baby boomers are gradually moving out, which will bring some inventory to the market. And these homes are taking longer to sell, which results in the inventory levels building up even if the number of new listings isn’t overwhelming. On the new home segment, builders are adapting to current market conditions by building smaller, less expensive homes, and focusing on markets where population is growing.”

Freidus: “Inventory will probably tick up a bit, maybe up to 10%, as more owners decide to sell and new homes get finished. Even with that, the number of homes for sale will still be lower than what we used to see before 2020.”

Will 2026 be a buyer's or a seller's market?

Which side holds the most cards in 2026? The experts are betting more on buyers.

Mann: “2026 will lean toward a buyer’s market. Higher borrowing costs reduce buyer competition, forcing sellers to adjust prices or offer concessions. When inventory grows and demand slows, buyers gain negotiating power. That dynamic is expected to continue unless the Federal Reserve makes drastic cuts, which seems unlikely while inflation pressures remain.”

Sharga: “I believe 2026 will basically be a neutral market on a national basis, but several regions have already slid into buyer’s market territory, and we’ll probably see that happen more broadly next year. We’ll probably end 2025 with about a 5-month supply nationally, and it wouldn’t be a shock to see the country edge toward a buyer’s market in 2026 unless affordability improves and sales volume increases.”

Chen: “The softening of home price appreciation indicates that we are more in a buyer’s market than in the past year, but that is starting to vary more in different areas of the country. For instance, California and Florida continue to see a more drastic impact of home price reduction, whereas the Northeast and Midwest are seeing pricing push upwards 2.4% quarter-over-quarter.”

Evangelou: “More inventory coming onto the market in 2026 will help to create a more balanced market. However, the key issue is that there is still a severe housing shortage of homes at the price points that most Americans can afford. So, while overall conditions will ease, demand and supply will continue to look very different across price segments, with ongoing shortages at affordable levels.”

Glick: “The market will be more balanced overall, with a slight tilt toward buyers in a number of metros. Here’s my rule of thumb: Around 5 months of supply is a fair fight. We’re near 4.6 months of inventory nationally, and I expect a bit more inventory next year. That means less pressure, more days on market, and more room to negotiate, especially on homes that need work or are priced above the comps. Well-priced, move-in-ready homes will still sell quickly.”

Will the housing market crash?

Nobody wants to envision a housing crash, but our housing market predictions for 2026 asked the experts the tough question: how real is the risk of a downturn next year?

Sharga: “People selling ‘can’t miss investment strategies’ on YouTube have been breathlessly predicting a home price crash since 2022. It hasn’t happened yet, and is highly unlikely to happen in 2026, or anytime soon. That’s because we’re still short on supply – builders underbuilt for over a decade following the Great Recession, while the number of young adults grew dramatically. Nearly 5 million young adults reached the age of 35 in 2024 - an age where people generally form households and look to buy a home. They haven’t done so at the same rate as prior generations simply because affordability has been a problem, but there’s a great deal of pent-up demand just waiting for market conditions to improve slightly. The second reason is that homeowners who don’t have to sell won’t sell at a loss or at a high discount. They’re content to stay in place and continue to amass equity rather than offer up their home at a 20% to 30% discount.”

Glick: “I do not see a 2026 crash. We don’t have excess supply or reckless lending like 2006 to 2008. In fact, mortgage delinquencies are under 4% and trended down into mid-2025, a far cry from crisis conditions. Credit standards remain relatively tight, as well, so the system isn’t overloaded with risky loans.”

Lord: “A crash is highly unlikely because the supply shortage continues to support valuations, even as affordability challenges limit upside. In addition, lending standards remain strong, household equity is substantial, and employment levels are solid.”

The bottom line: Will 2026 be a good year to buy or sell a home?

What do the tea leaves indicate about your prospect of finding the right home or unloading your existing one in 2026? According to our housing market predictions for 2026, experts see opportunities emerging for both buyers and sellers, though affordability remains a key hurdle.

Chen: “While affordability is still a challenge for most home buyers, we are in a much better spot now compared to the past couple of years. With more rate cuts expected this year, this might be a great time to be in the market to purchase and get a jump-start on building equity.”

Sharga: “My advice to homebuyers is if you find a home you can comfortably afford, move on it, because the longer you wait, the more you’re likely to wind up paying, and the less time you’ll have to build equity. My advice to sellers is to take a realistic assessment of what’s going on in your local market – you’re not going to get a price increase like early 2022 in today’s market – and make your decisions accordingly.”

DiBugnara: “It’s still advantageous to buy now rather than wait too much longer. Home prices ultimately can do nothing but go up over the long term. Until the massive housing shortage is addressed in the United States, either by the government making it easier for homes to be built or finding better affordability options, home prices will continue to rise with more demand than their supply. For sellers, who are sitting on a record amount of home equity, they may be getting to an inflection point where they have to sell soon.”

Freidus: “Next year should be a reasonable year for both sides. Buyers should focus on the total cost of ownership and be ready when rates dip. Sellers should price in line with recent comps and focus on presentation, because buyers are still looking closely at what they get for their money.”

Lord: “From a buyer’s point of view, 2026 should be better than the prior three years. Improved inventory and easing rates will allow more choice and less bidding pressure. Focus on affordability, and purchase properties that are aligned with your long-term needs while considering future refinancing as rates decline. In 2026, homes will take longer to sell, and sellers may need to offer concessions via buydowns or credits to complete the transaction. Spring and early summer are the best periods to sell the house.”

Orefice: “For people with strong finances, 2026 could be a good time to buy. Interest rates are likely to drop, and sellers will be eager to move their properties. The trick is getting those strong finances in this economy.” Mann: “For most, 2026 may not be the best year to sell. Elevated rates mean borrowing is expensive, while high prices make affordability tough. Sellers may face weaker demand and lower offers. My advice to buyers is patience, since rates and prices are more likely to ease by 2027.”