A New Era for the U.S. Housing Market: What 2026 May Bring Nationwide | Avant Garde Aspen Luxury Real Estate

After four years of pandemic-driven disruption, the U.S. housing market is beginning to find its footing again. Extreme conditions that defined the early 2020s — frozen mobility, rapidly rising mortgage rates, affordability pressure, and uneven inventory — are gradually giving way to a more balanced and predictable environment.

According to Compass research and analysis from Altos Research, 2026 marks the beginning of a new housing market era, one defined not by dramatic swings, but by steady normalization. While challenges remain, the outlook suggests meaningful improvement in affordability, mobility, and overall market health.

A Step Toward “Normal”

The pandemic reshaped housing behavior nationwide. Buyers and sellers delayed moves, inventory tightened in many regions, and mortgage rate volatility made long-term planning difficult. Now, many of those forces are easing.

As the market enters 2026:

• Home sales are positioned to grow again

• Mortgage rates are expected to stabilize at lower levels than recent peaks

• Home prices are projected to level out

• Incomes are anticipated to grow faster than housing costs

Together, these trends signal a slow but meaningful reset — not a correction, but a rebalancing.

Four Key Housing Signals to Watch in 2026

1. Inventory Begins to Improve

National housing inventory is expected to grow by approximately 10%, giving buyers more choice and easing pressure on pricing. While inventory levels will continue to vary by region, this increase represents a meaningful shift after years of tight supply.

2. Home Prices Flatten

Home prices are forecasted to rise modestly — about 0.5% nationally — while incomes continue to grow at a faster pace. This divergence is a critical factor in improving affordability and marks a shift away from the rapid appreciation seen earlier in the decade.

3. Mortgage Rates Ease

Mortgage rates are expected to trade within a 5.9%–6.9% range, averaging roughly 6.4% for the year. While not a return to historic lows, this range provides a more stable and manageable financing environment for buyers.

4. Home Sales Rebound

U.S. home sales could reach approximately 4.25 million transactions, a 5% increase from 2025, as improving affordability and growing inventory bring more buyers and sellers back into the market.

Affordability Improves — Gradually

One of the most important shifts underway is how affordability improves. Rather than a dramatic drop in prices, affordability is expected to recover through:

• Flat home prices

• Rising household incomes

• Moderately declining mortgage rates

This extended period of rebalancing allows buyers to regain purchasing power while helping the market stabilize without widespread disruption.

The Great Stay Begins to Thaw

Since 2022, Americans have moved far less than usual — a phenomenon known as “The Great Stay.” Economic uncertainty, rate lock-in, and affordability challenges kept many homeowners in place, limiting inventory and slowing migration.

Now, early signs of thawing are emerging:

• Rate lock-in is becoming less restrictive

• More homeowners are considering moves

• Work-from-home flexibility continues to support mobility

As this frozen mobility eases, both buyers and sellers should see more opportunities to make long-delayed moves.

A Market Shaped by Geography

The Great Stay reshaped housing conditions unevenly across the country. Supply tightened across much of the North, while inventory expanded more in the South and West. These regional differences will continue to influence:

• Days on market

• Pricing power

• Negotiation dynamics

Local market conditions will matter more than ever in 2026, making expert guidance increasingly valuable.

As Compass Chief Economist Mike Simonsen notes:

“The market is shifting toward a new era where incomes rise faster than home prices and the deep freeze of the last few years begins to thaw. After years of delay, anyone looking to make a move should finally see greater opportunities to take the leap.”

Shadow Inventory and Pent-Up Demand

Beneath the surface, the data reveals significant pent-up activity. By late 2025:

• Nearly 60% of listings were withdrawn, rather than sold

• Purchase mortgage applications rose 15–25% year-over-year

• Closed sales increased only 2–4%

This gap highlights both shadow inventory (sellers waiting for better conditions) and shadow demand (buyers actively preparing but holding off). An estimated 150,000 additional homeowners may be ready to sell once conditions improve further.

The Big Picture

After years of uncertainty, the U.S. housing market is turning a corner. While challenges remain, 2026 is expected to bring:

• Stabilizing prices

• Improved affordability

• Gradually easing mortgage rates

• Renewed sales activity

Rather than a dramatic reset, this new era is defined by steady normalization — offering more clarity, confidence, and opportunity for buyers and sellers alike.

This analysis is based on internal Compass research and data compiled by Altos Research. Market forecasts are speculative and subject to change. This content is for informational purposes only and is not financial, legal, or real estate advice.