The Housing Market Could Grow In 2026 If This Happens

In 2025, the United States experienced housing market stagnation, with little change in month-over-month and year-over-year sales. Asad Khan, a senior economist at Redfin, said, "Many would-be homebuyers and sellers are paralyzed by high prices and economic uncertainty." But because the housing sector accounts for between 15% and 18% of the U.S. GDP, politicians and investors alike are working to alleviate the housing problems the country is currently facing heading into 2026. Affordability is definitely a big concern for younger buyers looking to purchase their first home; meanwhile, people who bought homes in the 2010s or in 2020, when interest rates were between 3% and 4%, don't want to give up their affordable monthly payments, although it's estimated there are around 500,000 more homes for sale than there are buyers. Portable mortgages could lead to a change in the housing market that makes more inventory available, but this might not be the answer for new buyers who lack an established low-rate mortgage.

Fortunately, the housing market could see some growth in 2026. Since mortgage rates, which were at their highest in 2023, have slightly but steadily declined over the last few years, further rate drops could prompt on-the-fence homebuyers to make a move. This is especially true if mortgage rates end up closer to the low 6% range that's predicted for 2026. Wage growth is also expected to outpace the rise in home prices, according to Redfin, translating to more income to put toward a mortgage and down payment.

Mortgage rates play a major role in the housing market. High mortgage interest rates generally lower demand because they raise monthly housing payments. The opposite is also true — when mortgage rates drop, people are more apt to buy. 

According to Freddie Mac, a 30-year fixed-rate mortgage was sitting at 6.15% as of December 31, 2025. That's a significant decrease from the 6.91% for a fixed-rate 30-year mortgage a year ago. While experts don't expect mortgage rates to fall below 6% in 2026, even this small drop could help encourage homebuyers to make a purchase. 

That said, at 6%, it's unlikely anyone with mortgages locked in at the lower, 2020-to-2022 rates will be too willing to sell, knowing they'll have to take on a more expensive mortgage. Doing so would result in an increased monthly house payment, which could make buyers officially house poor. But if wages increase and the mortgage rate at least holds steady, buyers will have more leverage. And while millennials overtook the Silent Generation in home wealth, they still have a long way to go to obtain what baby boomers had at the same age.