NAR Sees Strong Home Sales Rebound, Prices Up Four Percent in 2026

The U.S. housing market looks set to move off its trough in 2026, according to new forecasts from the National Association of Realtors released by Realtor.com. NAR Chief Economist Lawrence Yun projects existing home sales will climb 14 percent next year after three years of stagnation, while new home sales are expected to rise five percent. Prices overall are forecast to increase about four percent.

Yun attributes the turnaround to a slight easing of borrowing costs and a resilient labor market. “As we go into next year, the mortgage rate will be a little bit better,” Yun said. “It’s not going to be a big decline, but it will be a modest decline that will improve affordability.” He expects mortgage rates to average around six percent in 2026, down from a roughly 6.7 percent overall average for this year.

The predictions come as mortgage application activity has shown persistent strength compared with a year earlier. “Mortgage applications have been consistently above last year, implying that people’s desire to enter the market has been consistently positive,” Yun said. That sustained demand is an important counterweight to longstanding supply constraints that have kept inventories tight and prices elevated over the past decade.

A 14 percent rise in existing sales would represent a meaningful rebound from multidecade lows, but it does not imply prices will slump. A four percent price increase would moderate the sharp gains seen in previous cycles, reflecting a market that is healing rather than overheating. For prospective buyers a modest decline in rates would increase purchasing power, but affordability challenges will persist in high cost metros where price to income ratios remain elevated.

Market implications vary by segment and region. Existing home sales are likely to benefit most in markets where inventory can respond quickly and where wage growth has kept pace with housing costs. New home sales rising five percent signal some pickup in construction demand, yet industry analysts have warned that chronic underbuilding since the Great Recession limits how fast supply can expand. Without a substantial increase in homebuilding the market risks renewed pressure on prices in supply constrained areas.

Policy considerations are central to whether the rebound broadens. A modest fall in mortgage rates will help, but lasting improvements in affordability typically require more housing supply, targeted subsidies for low and middle income buyers, and local zoning reforms to encourage denser development. Federal monetary policy will also matter; the path of Treasury yields and Fed tightening expectations influence mortgage pricing even when headline policy rates stabilize.

Longer term demographic forces support some upside in demand. Millennials remain a large cohort in prime homebuying ages, and labor market resilience can sustain household formation. Still, the depth of the rebound will hinge on the interplay between modestly easier financing, the pace of new construction, and policy moves at local and national levels to expand affordable options.

For now NAR’s forecast offers a cautiously optimistic scenario: a housing market turning the corner in 2026, anchored by slightly lower rates and steady demand, yet constrained by supply and persistent affordability gaps.