US home sales outlook for 2026 weakens to 2% growth or less as mortgage rates remain above 7%

Inflation remains elevated, prompting central banks to keep short-term rates high.

The outlook for the 2026 housing market has dimmed for prospective buyers as mortgage rates remain above 7%. That shift has led National Association of Realtors chief economist Lawrence Yun to scale back the stronger rebound he had expected.

Key takeaways

Speaking to Realtor.com, Yun said the resale market is now likely to see only slight gains in 2026, with both sales volume and prices rising by about 2% or less compared with 2025. He also expects newly built homes to perform worse, projecting new-home sales to fall 5% from 2025.

The revised forecast marks a sharp downgrade from his earlier view. In November, Yun predicted existing-home sales would jump 14% from the prior year's three-decade low and that median prices would rise 4%, before later trimming the sales-growth estimate to 4%.

He attributed the weaker outlook to higher borrowing costs. “The big unpleasant event over recent months is the fast-rising mortgage rates, therefore further denting the market outlook,” he told Realtor.com.

Yun had assumed mortgage rates would average about 6.5% in 2026, but they have stayed above 7% since late September. At the Mortgage Bankers Association’s annual conference, chief economist Mike Fratantoni said rates are likely to hover near 7.3% for the rest of 2026 and remain above 7% into 2027.

Additional context

Realtor.com’s economic research team offered a similar assessment in its midyear update, forecasting only a 1.2% increase in existing-home sale prices by the end of 2026 because of inflation, higher oil prices tied to the war in Iran, and rising interest rates.

Yun has pointed to many of the same headwinds, including elevated interest rates, inflation, and economic uncertainty linked to the Iran war. Even modest rate increases can sharply raise monthly payments, making mortgage changes especially important for affordability.

He also expects the new-home market to weaken as financing costs continue to pressure both buyers and builders.

Fratantoni described the forces keeping rates high this way: “Inflation is too high, leading central banks to raise short-term rates, while budget deficits and debt are unsustainably high, leading bond investors to push up longer-term rates.”

What might help?

In an appearance before Las Vegas Realtors, Yun said the housing market still depends most on lower mortgage rates, and according to the Review-Journal, he called interest rates “the magic that drives the market.”

In his view, buyers who are waiting on the sidelines could return if rates ease. “If somehow at the beginning of 2027 we see mortgage rates closer to 6%, we will see good buying activity at that time,” Yun said.

He also said a recession, while damaging to much of the broader economy, could unexpectedly support housing if it pushes rates lower. “In all past economic recessions — other than the subprime blowout — the interest rates moved down and home sales increased more in a recession than a nonrecession,” he said.

Many would-be buyers may continue waiting in hopes that borrowing costs become more manageable, even if home prices do not fall much.

Yun said the housing market remains highly exposed to forces beyond the control of individual buyers or sellers: “There's so much uncertainty on geopolitics and, of course, the artificial intelligence and data center boom that is currently occurring,” Yun said. “What if it turns into a bust? It's going to create a different dynamic.”

Where to learn more

High rates and affordability pressure are affecting the housing market in different ways. These stories examine riskier mortgage choices, regional sales shifts, and buyers being squeezed by prices.

• Across the U.S., riskier mortgages are spreading as higher rates keep applications falling.

• In Western Massachusetts, home sales climbed sharply as Pioneer Valley demand jumped over 25%.

• In Jacksonville, new-home premiums nearly vanished, with some builds now cheaper than resales.

• In Frisco, Texas, home prices fell hard, with some sales down 26% from 2022.

• In Utah, rising prices locked out 91% of renters from buying homes.