The coming year is likely to be more affordable for many homebuyers, even as home prices continue to rise for sellers.
The reason for the improvement in affordability is that we expect mortgage rates to average lower in 2026. In fact, monthly payments are likely to decline for the first time since 2020.
On top of that, incomes will increase, which will free up a portion of the monthly payments — which buyers typically have to fork out to buy an affordable home. This is based on a modest improvement in affordability in 2025 to bring spending under this key benchmark for the first time in 2025.
Improving affordability will help bring more sellers back into the housing market, increasing inventory by about 99 percent. And buyers and sellers will mostly meet in the middle, helping to boost transactions by a modest 1.7%.
For renters, I expect to see additional rent relief, although it’s worth noting that both rental and for-sale real estate markets vary locally, and you can find trends in your neighborhood in our Realtor.com 2026 housing forecast.
Consistent with our expectation that mortgage rates will remain low, mortgage rates fell 4 basis points this week, moving toward the bottom of their narrow range since mid-September, the lowest rates since October 2024.
The mortgage rate for a 30-year fixed home loan fell for a second week to 6.19 percent for the week ended Dec. 4, according to Freddie Mac. Rates averaged 6.69 percent during the same period a year ago.
In mid-November, markets pushed rates higher, questioning the prospect of a Fed rate cut in December. As the meeting approaches, investors expect that the available data will be enough to support a rate cut for the majority of the committee, even as the views on the appropriate Fed policy rate differ.
Simply put, even though the Fed is likely to cut rates at next week’s meeting, I don’t expect it to have a big impact on mortgage rates. We may see more volatility as economic data continues to lag behind the government shutdown. For now, mortgage rates are pretty stable.
Weekly trends in housing data have been relatively steady. Prices are hovering near flat. Homes were on the market two days longer than last year, narrowing the gap with activity earlier in the year.
Finally, let’s zoom in on luxury trends in two pandemic hot spots: Nashville, TN, and Austin, TX. There are many commonalities between the two markets, but as the national luxury market has softened in recent months, Nashville’s high-end status has held steady. While both markets had similar luxury price points in 2018, Nashville’s high end is now more expensive than a million dollars.