Realtor.com predicts mortgage rates will continue to average more than 6 percent next year, but affordability will improve modestly as typical monthly payments fall below 30 percent of household income for the first time since 2022, the Realtor.com ® economic research team predicts in its 2026 housing forecast.

The forecast predicts that mortgage rates will average 6.3 percent in 2026, a slight improvement from the 6.6 percent full-year average expected for 2025, but still higher than the 4 percent historical average recorded from 2013 to 2019.

Nationally, home prices will continue to grow by 2.2% at the end of next year, after a 2% increase in 2025, the forecast indicated. However, income and overall inflation are expected to continue to rise faster than house price growth, giving a slight boost to affordability.

“After a difficult period for buyers, sellers and renters, 2026 should be a welcome, if modest, move to the residential market,” says Realtor.com’s chief economist. Daniel Hale. “Incomes are climbing faster than inflation as mortgage rates stabilize at low levels, creating space for inflation to improve.”

Still, domestic sales are likely to remain sluggish. After current home sales hit a 30-year low in 2024, they are forecast to improve slightly in late 2025, rising 0.1 percent to 4.07 million.

Next year will see more modest improvements, with total existing home sales rising 1.7 percent to 4.13 million as affordability improves. While this would be an improvement over the previous three years, it is below the 5.28 million annual average from 2013 to 2019.

Meanwhile, rents are expected to fall 1 percent next year, while new home construction will expand 3.1 percent and existing home inventory continues to rise 8.9 percent.

Predictions for Home Buyers in 2026

According to forecasts, homebuyers will benefit from the easing of mortgage rates as well as a modest decline in real, or inflation-adjusted, home prices.

Realtor.com’s economic research team expects household incomes to rise more than 3.6 percent, beating both home prices and overall inflation, which is expected to come in at more than 3 percent.

And as a result of easing mortgage rates, the average monthly payment to buy a median-priced home for sale is expected to fall 1.3 percent year-over-year, marking the first annual decline in average monthly payments since 2020.

The monthly payment to buy a typical home is expected to rise to 29.3% of median income, its first year below the 30% affordability threshold since 2022 when mortgage rates rise further.

The forecast expects unemployment, which was 4.3% in August, to climb further, but not exceed 5% in 2026.

“Overall, consumers appear to be in good shape, but low-income and younger people may be at greater risk as the labor market cools,” the report said.

Homebuyers will also benefit from the continued expansion of inventory, with the supply of existing homes expected to grow 8.9% in 2026, marking the third consecutive year of gains.

Still, the pace of inventory expansion has slowed, as the market moves closer to pre-existing norms. By the end of 2026, nationwide inventory levels are expected to be about 12% below the pre-2020 average, an improvement from the 19% difference in 2025 and about 30% in 2024.

New construction will also continue to play an important role in providing homebuyers with more options, with single-family residences projected to increase by 3.1 percent to 1 million by 2025.

Overall, the national housing market is expected to remain in balanced territory in 2026, with an average of 4.6 months of supply over the year.

“The path back to historical levels of affordability will be gradual, but 2026 takes a solid step in the right direction,” Hale says. “For many buyers who have spent years navigating limited options and steep competition, a balanced market with more choice and a slightly lower cost burden could be a game changer, even if conditions remain far from easy.”

Forecast for Home Sellers in 2026

Over the past few years, sellers have faced a market of sluggish sales and rising inventory, slowly tilting the balance of power in favor of buyers.

According to a new forecast, these trends are likely to continue into 2026, suggesting that sellers remain flexible and set realistic expectations when it comes time to list their home.

“Sellers who want to sell will certainly want to pay attention to the competition when setting price, and may need to be prepared to adjust expectations based on market feedback,” the report said. “The degree of adjustment will also depend on their geography and their prices.”

Recently, the market has been stronger in the Northeast and Midwest than in the South and West, and new forecasts show that these trends will continue in 2026.

Recent data also show that price reductions are somewhat more common in lower-priced homes, and relatively rare in homes priced over $1 million, where wealthier buyers are still driving solid sales activity.

Forecasts show that home prices will increase modestly in many markets next year, but prices may decline in some markets, particularly in the South and West.

Predictions for Tenants in 2026

In 2026, rental supply is expected to drive demand, lower rents and drive tenant mobility.

Rent affordability in 2026 is expected to decline by an estimated 1.6 percent in 2025 after asking rents in 2025. Next year, forecasts expect annual rents to decline an additional 1 percent, as more new multifamily units come on the market.

“The reduction in rental prices will continue to provide more relief to tenants [COVID-19] “It’s not a dramatic reset, but it’s a purposeful shift that moves the market back to equilibrium,” Hale says.

This should continue to make renting a relatively cost-effective option compared to buying in the short term in most markets.

Young adult renters, who historically don’t have access to high home equity to buy a home, can take advantage of this trend when their leases expire and see if there are more affordable rental units in their market.