Forecasts point to a warmer housing market – but not a boom
Economists at Zillow said the housing market appears set for “steadier footing” in 2026 as affordability slowly improve, sales ticks higher and rent growth stays muted in most major metros.
The outlook still keeps mortgage rates above 6% and emphasizes that any recovery would be gradual, not a repeat of pandemic-era frenzies.
Zillow projected more sales, modest price gains
Zillow projected US home values would rise 1.2% in 2026 after a largely flat 2025, cutting the number of big markets with annual price declines from 24 this year to 12 next year.
Existing home sales were forecast at 4.26 million, a 4.3% increase as “years of limited inventory and high mortgage rates” gives way to slightly better affordability and some release of pent-up demand.
“The housing market is finally settling into a healthier state, with buyers and sellers starting to return,” said Mischa Fisher, chief economist at Zillow.
“Buyers are benefiting from more inventory and improved affordability, while sellers are seeing price stability and more consistent demand. Each group should have a bit more breathing room in 2026.”
Mortgage rates, construction and renters’ relief
Zillow’s economists said mortgage rates are “unlikely to fall below 6% in 2026,” even as recent easing has already pushed affordability to a three-year best. That view aligns with other forecasters who expect rates to hover in the 6–7% range absent a recession.
On the supply side, Zillow expects 2026 to be the weakest year for single-family housing starts since before the pandemic, with builders leaning on incentives such as rate buydowns to clear existing stock rather than breaking ground on new projects.
For renters, Zillow forecast that multifamily rents would rise just 0.3% in 2026, allowing incomes to catch up after a year in which 37 of the 50 largest markets see earnings grow faster than rents.
New York City remains an exception, with StreetEasy economists expecting rent growth there to accelerate.
Broader shifts: lifestyle renters, energy savings and AI
Zillow’s outlook also highlighted the rise of the “lifestyle renter” – households choosing to rent for flexibility and lower maintenance even if they could buy – and pointed to growing demand for family-friendly amenities such as “imagination centers” and “homework pods” in multifamily buildings.
According to the Knightvest Capital’s latest Multifamily Renter Sentiment Report, the American dream of homeownership has lost some of its luster, with a growing number of renters choosing to stay put and embrace apartment living as a long-term lifestyle.
“Renting is no longer a temporary compromise but a deliberate, lifestyle decision,” David Moore, Knightvest founder and CEO, said.
“These findings underscore our renewed optimism for the multifamily industry as renters report confidence in both their personal financial situations and in their decision to rent going into 2026.”
Borrowers globally have already been responding to affordability strains by refinancing, repricing and seeking advice on how to stabilise budgets as rates rise, with arrears remaining low despite pressure on household finances.
Michael Brennan, President of Nationwide Mortgage Bankers, urges originators to help homeowners leverage equity and manage consumer debt through proactive reviews and strike rate alerts.https://t.co/Htsu4BGceB
— Mortgage Professional America Magazine (@MPAMagazineUS) November 23, 2025
Looking ahead, Zillow predicted that inflation-conscious buyers would favor “energy-efficient” homes with storage and smart systems that cut utility and grocery costs, while AI tools evolve from basic assistants into “transaction coordinators” that help manage homebuying end to end.
For originators and lenders, 2026 still looks challenging, but a little less unforgiving. Modest price gains, slightly higher volumes and a cooler rent curve suggest a market where execution, advice and product design, rather than easy money, would decide who grew.
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