Homes may become more affordable, but rents may rise
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The U.S. housing market is poised for a Great Housing Reset beginning in 2026, marked not by a sudden correction but by gradual normalization.
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Affordability is expected to improve as wage growth finally outpaces home-price gains for the first time since the Great Recession.
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Redfin forecasts modest increases in home sales, rents and refinancing activity, alongside major demographic and policy shifts driven by high housing costs.
The U.S. housing market is approaching what real estate brokerage Redfin calls the Great Housing Reseta years-long transition toward more normal levels of pricing, sales and affordability after a decade of volatility. According to the real estate brokerages annual forecast, the reset will take shape in 2026 as mortgage rates ease, wages rise and home prices cool to their slowest growth pace in years.
Rather than a dramatic correction or recession, Redfin expects the market to unwind gradually. This will be the first prolonged period since the Great Recession when incomes consistently outpace home prices, the report notes.
Redfin expects the 30-year fixed mortgage rate to average 6.3% in 2026, down from 6.6% in 2025. A softer labor market will likely prompt Federal Reserve rate cuts, nudging mortgage rates into the low-6% range but not dramatically lower. Persistent inflation risks and the absence of a recession scenario will keep policymakers from slashing rates beyond what markets already expect.
Affordability finally starts to improve
For the first time in well over a decade, wages are expected to grow faster than home prices. Redfin projects the median U.S. home price will rise only 1% year over year, held in check by high borrowing costs and a cooling economy.
Lower mortgage rates combined with modest price growth mean monthly payments should rise more slowly than incomes. That shift will draw some buyers back into the market, though many will still find homeownership out of reach.
Existing-home sales are forecast to increase 3% in 2026, reaching an annualized pace of 4.2 million. Lower rates should contribute to a stronger spring buying season compared to 2025, when rates hovered near 6.8%.
Still, Redfin cautions that a truly robust rebound remains unlikely. High costs, economic uncertainty, and a labor market disrupted by AIparticularly for white-collar workerswill keep many would-be buyers on the sidelines.
Rents climb as apartment supply shrinks
Renters should expect 2% to 3% increases by years end as demand for apartments rises and new construction slows. The boom in multifamily development during 20212022 has tapered off, meaning fewer units are coming online.
Competition for rentals will intensify, especially as many Americans continue renting rather than buying. In markets such as South Florida and Southern California, however, stricter immigration enforcement may temper rent growth.
The affordability crunch is also altering household structures. Redfin predicts more multigenerational living, more adult children living with parents, and more friends buying homes together under formal agreements.
Family sizes may shrink as well. With economic pressures rising and housing costs stubbornly high, the long-running decline in U.S. fertility is expected to continue.
Renovations that support multigenerational livinglike separate suites and flexible spacesare poised to be one of 2026s biggest design trends, according to a recent Thumbtack survey of renovation professionals.
A bipartisan priority
After an election year in which young voters prioritized housing costs, Redfin expects rare bipartisan alignment. The report suggests President Trump may declare a national housing emergency, while lawmakers on both sides support measures to boost supply.
Pro-housing YIMBY policies continue to gain traction. Proposed legislation including the Yes in My Backyard Act and the Build More Housing Near Transit Act aims to streamline construction and encourage denser development. Other ideas, such as relaxed zoning for ADUs and even a 50-year mortgage, may attract political interest, though Redfin argues only time will meaningfully improve affordability.
With roughly one-fifth of homeowners holding mortgages above 6%, a dip in rates could spark a refinancing boom. Redfin forecasts refi volume to jump more than 30%, reaching about $670 billion in 2026.
Homeowners are also expected to tap into record levels of housing equity$181,000 for the typical mortgaged homeownerto fund renovations. Staying put and upgrading will be more appealing than buying in many markets.
Winners and losers
Regions near New York City and the Great Lakes are expected to outperform the national market, thanks to relative affordability, climate stability and proximity to employers. Smaller Midwestern metros will continue attracting graduates seeking stable, blue-collar career paths as AI reshapes entry-level office work.
By contrast, markets that boomed during the remote-work era, such as Nashville, Austin and much of coastal Florida, may struggle. High insurance costs, climate risks and a return-to-office shift will leave some sellers accepting losses.
Posted: 2025-12-02 15:18:22















