2026 Housing Market Forecast - Home Sales, Inventory & Mortgage Interest Rates

The housing market of 2026 is likely to look quite a bit different than it did in 2025, 2024, and so on. In today's episode, we're going to give you our 2026 housing market forecast. We're going to cover everything from home sales, we're going to talk about inventory, buyer demand, as well as mortgage rates, so that if you're out there looking to buy a home, not only are you informed, but you can plan ahead with strategy so that you come into 2026 knowing exactly what's likely to happen. On top of that, we're going to go back over last year. We're going to tell you exactly what we thought would happen and do a little bit of fact check to see if we were actually right. So with that, Josh, let's talk about it. So we've got all sorts of pithy sayings for this time of year. Those who don't know the past are doomed to repeat it. I don't know that it's super instructive to look back, but it is helpful for a couple of reasons. For those of you who, hey, the New Year's resolution is we're going to become homeowners in 2026. We're going to buy our next home. We're going to buy a vacation home. Whatever reason you're here educating yourselves, super valid to say what happened last year, the last couple of years, and what does that mean for this year and how does that help me in my planning. For Jeb and I, even if it weren't the podcast where we're here and we want to go through this and talk to you and give you some guidance on what next year is likely to look at, we have to project our businesses. We both have teams. I mean, how many people do we need on the team? Do we have enough staff? Do we have enough coverage? Do we need more? Do we need less? How is this market going to change? So this is an exercise, Jeb, I've done for more than 25 years. You've probably done the same. It's just more fun here that we get to put it on record every year where you guys can see the numbers. If you want, you can go back and check 2025, but we're going to do the CliffsNotes version of it and tell you what each of us said last year on probably the four most important elements of what moves the market and go through it. Mortgage rates, for those of you, we do do a full separate episode that will be a full projection on rates and all the things that are going to impact rates for next year, but we do have it in here as well. So you get a handle on it because that's one of the big drivers when we're talking about a housing market forecast is affordability. What does affordability look like? How is that going to dictate what happens in housing? Right. If you've been listening for any period of time, something I say all the time, almost in every single episode, every video I do on my channel, is supply and demand is what drives markets. It's age old. We've been hearing it for years, right? Basic economics. And so with that, Josh, let's start with supply. Inventory. We went through the pandemic. Inventory was really, really low. A lot of demand pulled forward. That's why we saw home prices shoot up. 2025 was a little bit different. We saw inventory pick up. We saw the housing market stabilize in many markets out there. But with that, there was still buyer demand. Things still moved. Appreciation still happened. But what did we say exactly in 2025 with inventory? And then maybe get your thoughts on what you think 2026 looks like. Well, here, because inventory is more of the realtor side, you had more to say on it last year, but my thoughts were that we would have inventory growth driven more by slower absorption than a surge in listings. It wasn't going to be a bunch of homes coming to market. It would be less homes being sold or less people being able to afford really at current prices. So higher rates would equal more inventory and lower rates would get us less inventory because of faster absorption. And that is essentially how we saw it play out. And you'll see, we both expected lower rates earlier in the year than we got them. And when we did get them, we saw that inventory growth tail off. So I'm pretty on track with what happened. It's a difficult one to track, but there was a lot of headlines, Jeb, in the middle of the year that inventory is exploding. By the end of the year, we're going to have these massive levels. But on the live show the other night, you showed the chart. Basically, the majority of the West, other than a couple of boom towns, is exactly where we were pre-COVID. The Northeast is much less inventory, Northeast and Upper Midwest, much less inventory than we had in 2019 pre-COVID. And the Southeast, largely because of building and slower net migration down there, has backed up and has more inventory than we did in 2019. But how did that jive with what your thoughts were last year, Jeb? Well, the summary is pretty simple. I said inventory expected to rise meaningfully. Something like a 13% year-over-year consensus was my thought. It ended up being quite a bit higher than that. Inventory, I think, as we said today, is about 15% higher than it was this time last year. So depending on when you looked at it in the year, depending on how far I was off, but I think we got 22%, 23% at some point of inventory over those levels of last year. So inventory definitely increased. On that, I said more sellers are willing to give up lower rates for lifestyle reasons. We definitely saw that. I saw that personally. And I think we're going to be talking about that a little bit more here as we talk about inventory, because I think that's going to be happening even more in 2026 as affordability improves. And the last thing is not a real return to 2019 levels nationally. And I think we ended the year 15, 16 major metros having inventory back to those 2019 levels, but the majority of the United States still sitting well above those 2019 levels when it comes to inventory. So off a little bit, inventory rose more than I thought it would. And interest rates didn't improve as much as I thought they would, which we can talk about. And so with those things, we just didn't see exactly what I thought we would see. But nevertheless, inventory was one of the drivers. Because we saw more inventory, we did see a little bit more buyer demand come to the market. Home sales picked up a little bit. And the year was, I think, a better overall year, not only for you and I in this business, but also for those out there looking to purchase homes. First off, a huge thank you. The fact that you keep coming back every week, we do not take that lightly. What started out as two guys just sharing what we know has somehow turned into this growing community. And that's all because of you. More importantly, we have a lot more to do. If you like what you hear, make sure you hit the follow button. Less than one in four regular listeners have done that. And we'd love to get that figure higher and keep feeding the algorithm so we can grow the show. Our plan is to keep doing what we do, bringing the right guests, tackling the topics that actually matter, and keeping it real every single week to help you become an educated home buyer. We appreciate you for being a part of our online family. It was more balanced, a little less frenetic than the last couple of years, a little less whipsaw. And we predicted, we both predicted volatility this year. And that's probably coming off of three of the most volatile years or two and a half of the most volatile years that we'd ever seen. We got to see a little bit less of that. So from that perspective, Jeff, maybe another measure of inventory and a thing that's important to talk about, especially in that context of supply and demand is months of supply. So most markets that the number that everyone throws out there as a rule of thumb is six months is a balanced market. And most markets, we're still well shy of 6%. And yet most are what you would call a balanced market where we don't have sellers being strongly in control. And some of that comes to the balance of supply and demand. We have less absorption. We have less buyers because of affordability. So a lower number of months of supply is leading to a more balanced market nationally. Is that about how you see it? Yeah. And you said 6% a minute ago and you meant to say six months. Yeah. I think nationwide, as we sit at the moment, we're about 4.4 months is my understanding, my last reading that I remember on that. But I care less about that now because again, it's a nationwide number. We talk about real estate being local. You can have some markets like Miami with 7.7 months or something crazy on months of supply, but that had no impact on what's happening in Connecticut and some of these other markets where people can't get an offer accepted because it's still just nuts out there with no inventory demands through the roof. And you just got a lot of competition. So it's relative, but even then you can see a market that has six months supply where some homes are selling quickly, others aren't selling as fast. And so not only is it a month of inventory thing that you have to take into consideration, you also need to consider price point. I mean, the closer you are to that median home price, and if you can be below it in any market, the crazier that market's going to be. And the harder that it's going to be to get an offer accepted, probably the less inventory in those markets as well. The higher the price point got inventory building and probably less buyer demand just because of affordability. But no, I think 2026 for me, if I were saying is inventory is going to continue to pick up because I think this year overall, you're going to have better affordability out there. I think the average 30 year fixed rate is going to be less than it has been the last couple of years, which means more buyers coming off the fence. On top of that, I think the trend continues where people that have lower interest rates and have been sitting on the fence, contemplating whether or not they're willing to give that up. I think more and more of those people are getting to those lifestyle changes where they're just like, you know what? I've got to bite the bullet. I can no longer do this for one reason or another. And because of that, I think inventory picks up in a... I don't know that we... Again, I don't know that the entire United States goes back to 2019 levels, but I think you see more markets out there probably getting closer to it. When we look at it, it's sort of this balance in terms of for inventory to grow, you have to have a drop in buyers or a drop in demand or an increase in supply. Hard to have a significant increase in supply because most people are happy where they're at and not wanting to move. Hard to have an increase in demand when affordability is relatively low. We talked about the three drivers of improving affordability is home prices can come down, wages can go up, interest rates can go down. And the only one of those that moves a lot in the short term is interest rates. And it's been unlikely that we're going to see a big major move. So from that perspective, inventory will probably just continue to normalize. As you said, rates come down, cool, there's more demand. And you go, oh crap, are we going to have less inventory? Well, no, because some of that is sellers coming to market and going, I got to buy too. So we kind of have this balance that it wouldn't surprise me if we end next year with more total inventory on the market than we have right now. But I don't think it's going to be a major move just because all the reasons that we talked. Yeah, for me, if I had to summarize inventory, I would say that it's going to be the best year for buyers probably because of affordability. Everything leads back to affordability, everything. Because of affordability, buyers are going to have more options. It's just going to be a more normal market prior to what we saw in the last, say, five years, since the pandemic. And most people don't have that memory because they weren't looking to buy a house prior to 2020. They just have the memory of everything that's happened since then. And I think for us being in the business, it gets back to more seasonality, a little bit more cyclical, a little bit more quote unquote normal. And so transitioning from their supply to demand, we have sales volume as a measure of demand. How many homes sell? It's not a pure measure of demand. There's a few things else that go into that. But what were you expecting in terms of total home sales in 2020? We're coming off like 30-year lows, 30-year lows during a 30-year timeframe when the population grew a lot. So if we adjust for population per capita, home sales are spectacularly low. But what were your thoughts on this year and where do we end up? Well, I think it's important to note what's normal. What's normal in sales volume in a 2019 this year? And I don't actually know what that number is, but if I had to guess, probably somewhere around 5 million, give or take a little bit. And in the last couple of years, what we've seen is 4 million, 4 million total home sales. But going back to what our forecast was for 2025, I said somewhere between 4.3 and 4.4 million existing home sales. I said existing homes would matter more than new construction due to low starts. That changed a little bit because of all the incentives these builders did, the offering buy-downs and some of these other things. And it helped move some of the new construction market. But with that said, I mean, I'm not that far off. I think we're probably going to end the year somewhere between what, 4.1 and 4.2, Josh? I'm not 100% sure, but somewhere in that ballpark. So I mean, I was a little high on the existing home sales. Again, it all plays back to mortgage rates being a little bit higher for the majority of the year. But yeah, so what were your thoughts? Well, it was funny listening back to it because my initial thought was 4.6. And as we talked through it on the episode, I adjusted that and gave a range because I felt that it was largely dependent on what was going to happen with interest rates this year. And to a degree, it was. So I started at 4.6. And by the end of the episode, backed it down to base case being 4.5. But if rates stayed elevated, that we'd be looking at 4.1. And what happened in the first quarter of this year, with all of the tariff fears, rates spiked back up. And we hit, you know, Logan Mojoshami had a range of interest rates for this year of 5.75 to 7.25. And we hit the peak of that range. So it definitely slowed down the first half of the year. The second half has looked better. But even if we had had the rates we've had for the last 90 days, the entire year, probably still wouldn't have got to 4.6, maybe 4.4, somewhere in that range. So what does that tell us in your mind that we're going to see in terms of total home sales for this year? I think we're probably getting closer to that 4.4 to 4.6 number that you mentioned last year. I choose from. Because part of the problem wasn't just affordability. Part of the problem was people looking at the market thinking, hey, listen, I'm a seller if I can find the right house. And then they look at the market going, I can't find the right house. The inventory's low. What I want's not on the market. I'm not willing to put my home on the market and sacrifice selling it and not having the move-up property. I don't want to be contingent. All of these things that sellers battle in their heads. And because of that, I think that also limits some of the potential of sales actually taking place. So I think, again, sales increase, what does it look like? I mean, is it 10%? I think that's a fair number to say. So if you're at 4.1 now, you end up at 4.5-ish, 4.6-ish. So yeah, I think that's where we end up. I think you're going to a little bit more normal market, not completely back to 2019 sales volume, because affordability is still going to be a factor, but there's going to be more activity. I'm going to try the reverse jinx, Jeb, and I'm going to project 4.4. And I'm going to hope we come back next year and we blow that out of the water. I'm going to go 4.4. It would be a nice return, just basically after the last couple of years. It's still well short, more than 10% short of what we would probably consider normal or traditional or expected with the size of population. But it would be a really good number off of some years that were 4.4.1. If you have 300,000 or 400,000 more existing home sales, it's a big number. So that would be a really good number for everyone in terms of volumes. And I think that's kind of the theme. If we look at next year, better. Better, but it's still really slow. If anyone had told you, even in 2019, 2020, that we were only going to move this many houses, you'd be like, well, I can't figure out how that would happen. And then they would explain to you, we would have a global pandemic and prices would go through the roof and then rates would skyrocket because of inflation. And you go, oh, okay. I understand. I see the recipe for it. Yeah. And I would still say, there's no way that happens. So let's talk about it before we talk about home prices, which I think is important to a lot of people. Let's talk about rates because again, everything we've talked about so far has been a factor of interest rates for the most part. And home prices are also going to be a factor of that. So in order to predict home prices, I think we need to talk about interest rates. Last year, Josh, I said that I believed we would have volatility like we did in 2024, kind of zigzag, which basically meant we're not going to go down in a straight line. We will see interest rates move lower thinking, hey, that's probably the top and they move back up again. And essentially, exactly what we saw for the most part. I also warned against trying to time the low in the market, which was very, again, very short period of time. It happened in the blink of an eye and moved up very, very quickly. And then also mentioned just, you have to lock when affordability works for you and not trying to pick the top, the bottom and rates. And it's really a just, hey, if you're going through the process and you got to do what's best for you at that time and not try to gain the system so much. But what were your thoughts on rates and where do you see them going? Well, the thing is we both mentioned volatility, expected it to be volatile up and down. And when you saw a rate that you liked, you probably should lock it. And really, if you look at the chart of the 30 year rate week by week last year, it was a pretty consistent move downwards after the first quarter. And we kind of ran up to that seven and a quarter and then just slowly moved down the rest of the year with a little bit of acceleration in the last quarter. So from my perspective, that was kind of a miss. There was less volatility than what you and I thought. It felt volatile when we were in it. Lance over at Resi Club put a chart together about 10 days ago of what's normal volatility in a year in terms of measuring a range from high interest rate to low interest rate in a given year. And over since 1972, I think the number is 1.4% from the highest rate to the lowest rate in the course of a year. And this year we were way under 1%. So it was less volatile than normal, even though we both felt it was volatile and predicted it to be volatile. So from that perspective, at risk of being wrong and reverse jinxing us into a bad thing, I kind of look at next year as more of a slow grind lower and less of the chop that we've seen with these unexpected zags to higher rates. Yeah, well, so let's go back for a little bit here because we didn't actually mention where we said rates were going to be. We said basically a shared range between six and a quarter, 6.8. We were off on both ends of that. It went higher than we thought, and it actually went a little bit lower than we thought, although neither of them stayed there for a very long period of time. In 2024, the average interest rate, Josh, was 6.9%. 2025, the average interest rate was 6.7%. This year, I think the average is probably, if I had to guess, going to be closer to that six and a quarter percent. That's going to be my guess here, which is about half a percent lower than this past year. And I think that means that you're probably going to see interest rates move into the high fives at some point in 2026. You're probably also going to see them move above six and a half at some point in 2026. How long it stays there? I don't know. I'd like to think I was off on that last part, interest rates moving above six and a half, but I do think there's definitely room for volatility in the market. We've gotten some recent data, employment data, pointing in the right direction for rates. Not great for the economy so much, but inflation pointing in the right direction. And neither of those have really moved the market. And is it seasonality? Is it a lack of traders being in on Wall Street, just being able to push the buttons and make things move? Is it the market wanting to see something more? I don't know. But I think with that, it's very data dependent, which is essentially what we said last year. The really good CPI data that we got is easily being dismissed. We had incomplete data collection for two months. It looks great. And if we flash forward 60 to 90 days and it proves to be true, rates are going to be a good bit lower. I'm not saying they'll be a percent lower, but there'll be a good bit lower than where they are today. If it truly is that the inflation was super low this month or much better than expected this month just because of the incomplete data collection, then again, that slow grind lower. I like kind of taking that look of what Lance is saying, OK, what is a normal year in terms of volatility? It's a one and a half percent range, 1.4 percent range. I think it's reasonable to think that next year will be less volatile than normal. So take a 1 percent range and say, do we lean towards lower than where we're at today or do we lean towards higher? If we look at almost all of the major forecasts, the NBA, the NAR, Fannie Mae, Freddie Mac, they all have economists. Zillow, Redfin, they all put out their numbers and they all think above six percent for next year. So for the average for the year, I think that's a pretty safe bet. Right. If we start the year at six and a quarter, you'd have to spend a chunk of next year under five percent to average a five handle. So the average for the year is probably six something. If we say, where are we 12 months from now? I would say within that within a half percent range of where we're at right now. So the high side would be six, seven, five. Low side would be five and three quarters. I think five and three quarters is probably more likely. The last few years when we were having this conversation, I looked at it and said, if we get a surprise, is the surprise likely to be good or bad? The surprise was more likely to be bad the last couple of years. Not that that was the more likely thing, but if you got a surprise, it was more likely to be bad. This year, when I look at it, if we get a surprise, it would likely be bad news for the economy, which is good news for interest rates. So if that were to happen, it would not be unreasonable to see a breakdown to five and a half percent, but a reasonable range for you looking in the next year is that five, seven, five to six, seven, five, and probably at the lower end of the six percent range for the majority of the year. And because of that, I think demand's going to pick up. You're going to have more competition in the market. Doesn't mean it's going to be pandemic crazy, but just know real estate's local. So pay attention to the things that we've mentioned prior to this, the supply, the demand, and we'll talk about it at the end when we talk about what you need to pay attention to. But those are the things that me as a real estate agent immediately think of when I think, hey, if interest rates stay in the six and a quarter and potentially move down, what that means, because I know the conversations I'm already having with potential buyers out there. So Josh, let's move forward into home prices. Last year, I predicted 2.4% to 4%. You said two to 3%. At the end of the day, the consensus was what? Where do we end up? The NAR has got it right around 2%. FHFA has their repeat sales index, which doesn't include jumbo loans or cash buyers. So it's a skewed index to that degree, 2 to 3%. CoreLogic is considered the gold standard. It's a paired sales index, which is probably the best. It's not a median figure. And they're about 1 to 2% year over year. So the 2%, the low end of both of our ranges is about accurate. So I would say it was at the low end of what each of us expected for this year. And based off of that, based off of everything trending to more of the same, I do expect rates to grind a little bit lower, but I also expect that that means that's not a super robust economy. It means unemployment ticking up, so you don't have a ton of consumer confidence. We don't have those animal spirits where people are just running out and buying home, so you don't have a high volume of sales, but you don't see sales pushing higher. So if I were to set a range for it this year, I think we'll be positive. I still see numbers are saying, hey, by this time next year, we could be negative on year over year growth. If what we think is going to happen plays out in terms of interest rates, I think we will be positive, but barely positive, 0 to 2%. And the important thing that you and I have always talked about here on the show, Jeb, if inflation is higher than the rate of appreciation for homes, then you have negative real price appreciation. And that is one of the ways, as much as the trolls hate to hear this, it is one of the ways that we normalize home prices and get to better affordability of just negative real home prices, even though they're appreciating. And the reason for that is that most homeowners, they can deal with that. If their home went up 1%, they don't go, oh my God, inflation was 3%. I lost 2% of my home's value. They're like, eh, it's worth a little more than last year. They're okay with that. And they'll stay there. And we talk about home prices being sticky to the upside. They don't panic sell because they're like, eh, we'll just wait around. We'll wait around until things are better. And if we look at that, those little hinges swing big doors over a three, four, five-year timeframe. If we had 0 to 2% growth over a five-year timeframe, home prices are 5% or 6% higher, but wages are 20% higher. If things normalize and you have a 4.75% interest rate, 20% higher wages and home prices only 5% higher than they are today, affordability looks a heck of a lot better than what we see today. And it's hard for people to see those little changes over a fairly long period of time making a substantial difference. But that is our likely base case for a correction in housing to get back to more normal terms and better affordability. Agreed. I think I'm going to go a little bit more pessimistic, zero to, I'd say pretty much flat. And flat, what does that mean? Minus one to plus one, somewhere in that ballpark. I just think affordability improves, inventory improves enough to keep home prices from shooting up in a lot of markets out there. And I think somebody puts their home on the market today, depending on where they are. It used to be, hey, that home sold at X, I'm going to price mine at at least X, maybe X plus this. I think now it is that home sold there, oh, lower rates. It started factoring in some other things and it's like, okay, maybe we don't price it at that. Maybe we price it a little bit lower to see if we can end up getting that price. But again, real estate's local. I think for the most part, home prices remain positive, but I see stabilization in some markets out there. So I think some markets, again, are going to show year over year negative appreciation just because of- We saw negative year over year in many markets this year. So it's absolutely going to happen in some markets. It's going to be more of that in 2026, but you're also going to have some markets that still post positive gains. And you're going to be like, well, how, where are those markets? I mean, it's back to more normal times, right? Not everything is moving a hundred percent together and that's what normalizing in the housing market is. So Josh, what do people really care about? They care about how it impacts them. If you're a home buyer out there in today's market, there's a couple of things that we always talk about, Josh, and it's buying when it's the right time in your life. One of the questions we get all the time is, should I buy a house now? When should I buy a house? And it's, yeah. And it's not, the answer is not the same for everybody else because people's life situations are different, right? Some people are just starting careers. Other people have been on the same job for 15 years in the same market. They know they're not leaving. They've been married. They have kids. They've, they've got some sort of foundation that, you know, those are the people that are probably a little bit more, more ready in some ways than, than the person that's 20 years old, just coming to the market, wondering how do I buy my first home? Because I saw that I need to own a home, right? Talk about buying when it's the right time in your life, relationship stability, job stability, financial stability to some degree. And that doesn't mean that you need to be rich, but it just means, hey, you need to have a career path that you know is going to be consistent. You got some money in the bank outside of your down payment, your closing costs, you know, Josh credit, credit's important. We don't talk about credit enough on here, but credit, having solid credit scores, if not working on them. And I don't know, what else would you add to that? It impacts every element of your life. So credit really, really is important. What I would say is from 2022 forward, the people who've bought homes that I see that were the most successful and happiest with the process were the ones that didn't do crazy things. They didn't do buy-downs. They didn't, you know, either permanent or a two-one buy-down and go with this marry the house date, the rate thing. They said, what's realistic? What could I deal with if it never gets any better? And a lot of those people that bought at seven and a quarter at 6.875, we've been able to get them down into the 6%. So they got a house that they were happy with. So they've been there two years. They've probably seen three, 4% appreciation, maybe five or six in some parts of the country. They've been able to roll their interest rate down. Their income's gone up a little bit over the last few years. And they're like, this is what I wanted. I wanted to get in. I wanted to start building equity by paying down principal, get a little appreciation and put myself in a situation where I can build equity and wealth for my family. So that's really what this comes down to. We cannot time the market. We look at these projections to say, is there any major landmines on the path? And this year probably looks to be less so than any time in the last three and a half years. So from that perspective, if now is the right time in your life, this year looks pretty good. And you're just not going to be able to time it. If we say, hey, I want to buy in 2026, should I buy in the spring? Should I wait until the fall? Should I go in the middle of the summer? It's all dependent on you and your life. Just do the prep, get yourself ready, and you should know. And you should know. Okay, well, how would I know? If it's not a hell yes, it's a hell no. You should be all in about buying a home or you should wait. There you go. And if Josh and I could be part of that process, we would love the opportunity. Reach out. Josh can guide you through that mortgage process, the pre-approval process, answer any questions you have on the mortgage side. And when it comes to buying real estate, if I can't help you directly, I can refer you to one of our lending partners nationwide that does business just like I do. And we can help you just like we've helped hundreds of people over the last couple of years. We would love that opportunity. There's a link in the description. And do us a favor. If you found any value in this episode, make sure you hit that thumbs up. Consider subscribing to the channel. This is episode 202 as we end 2027, 2027, 2025. You're jumping ahead. You got the time machine. Oh my God. We're two years ahead as we end 2025. But with that said, we appreciate you being here. We appreciate the support. We'll see you in 2026. Adios. Amigos.