Housing affordability may improve next year, but don’t expect a market crash
For more than three years, it’s been dismal to be a homebuyer. But in 2026, things might get just a little easier.
Housing affordability is poised to improve next year as mortgage rates decrease slightly and home price appreciation slows down. Those conditions — provided they hold — could bring more buyers and sellers off the sidelines and into the market during the traditional busy spring homebuying season, and help home sales notch their first significant gain since they plunged in 2023 to levels not seen since the mid-1990s.
Ultimately, affordability improvements next year are likely to be the first step in a longer period of market normalization, economists and experts who spoke to Yahoo Finance say. Given just how aggressively prices and mortgage rates have risen in recent years, many buyers will remain shut out of the market.
“It’s really only the start of a long process,” said Chen Zhao, head of economics research at the brokerage Redfin. “For a lot of people, they’re still not necessarily going to be able to get into the housing market.”
When many people think of scenarios that would make homes more affordable, what often comes to mind is events like the global financial crisis, which sent US home prices down an average of 27% between 2006 and 2012.
That’s not on deck for 2026.
While it’s possible that home prices fall slightly on average next year, few housing experts expect a crash because the country still has a shortage of homes.
Instead, most affordability gains will likely come via slightly lower mortgage rates and a pace of home price appreciation that drops below average wage growth.
Many economists forecast only modest home price gains of 1% to 3% next year. That gives incomes, which have been rising in the 3% to 4% range annually, a chance at outpacing home price appreciation for the first time in years. Home prices are also falling in some markets, particularly in parts of the Southeast and the Mountain West.
Lower mortgage rates would also help affordability, and are a real possibility. Rates have been hovering around 6.2% in recent months, and many economists expect them to average somewhere in the low 6% range next year. That’s down from this year’s average of about 6.6%.
“Across the year, there will be an improvement,” said Danielle Hale, chief economist at Realtor.com. “We expect monthly payments to be a little bit lower for the first time in five years.”
Even relatively small drops in mortgage rates can translate to meaningful changes in monthly payments. A homeowner with a $320,000 mortgage at 6.8% — where rates were at the beginning of the year — would pay about $2,086 toward their loan each month. At 6.2% — where rates are now — they’d pay $1,960.
“There’s noticeably more activity the closer to 6% we get,” said Mike Simonsen, chief economist at the real estate brokerage Compass.
More inventory can help spur the market by giving buyers more options to choose from. For-sale inventory improved this year, and most economists forecast another jump next year, especially as sellers who tried and failed to market their homes in 2025 give it another go in the spring.
By Simonsen’s estimates, about 150,000 sellers attempted to sell their homes this year but gave up. Many will likely return this spring if rates stay lower, helping improve both for-sale inventory levels and the size of the buyer pool if they move, he said.
Huntsville, Alabama, USA park and downtown cityscape at twilight. ·Sean Pavone via Getty Images
In Huntsville, Ala., home price appreciation has been relatively muted in recent years amid a surge of new construction activity, said Steve Stinson, a broker associate at Keller Williams Realty in the city. The slower growth caught some sellers who attempted to list at top dollar this year off guard. He expects many will be back in the spring with more realistic pricing expectations.
“I think sellers are going to have a better understanding of the market this coming year,” Stinson said. “This year felt like a ‘Let’s just put it out there and see what happens’ kind of year.”
Huntsville, which has been rapidly growing but also rapidly adding new homes, has been a market that’s been slightly tilted toward sellers in recent years, Stinson said. But many other cities in the Southeast have seen buyers pick up power as housing supply outstrips demand, while sellers remain in control in much of the Northeast and Midwest.
The regional differences, which are largely explained by new construction and buyers migrating in search of better affordability, have kept home prices rising quickly in many Northeastern and Midwestern cities and pushed down prices in markets like Denver and Phoenix, as well as Texas and Florida.
That bifurcation isn’t likely to change much next year.
Realtor.com sees cities like Hartford, Conn., Rochester, N.Y., and Grand Rapids, Mich., leading the nation in metrics like price appreciation and home sales, while those measures are more likely to fall in many Florida markets.
Redfin, meanwhile, sees the suburbs of New York City, Syracuse, N.Y., and Cleveland as the most likely to heat up in 2026, while markets like Nashville, Tenn., coastal Florida, and parts of Texas could continue to cool.
Still, some markets that have cooled off in recent years could be headed for more stable prices next year. Zillow expects home values to decline in just 12 of the country’s 50 largest metro areas next year, down from 24 this year.
In the western suburbs of Chicago, home prices have continued to rise in 2025 amid steady demand from buyers seeking more space but an easy commute to the city via public transit, said Brandon Blankenship, a Realtor at Keller Williams Premiere Properties in Wheaton, Ill. He sees little that would change that in 2026, especially if lower mortgage rates encourage more buyers to jump into the market.
“As we’ve gone through this pandemic situation, things started to calm down, but prices continued to go up,” Blankenship said. “I think the market is going to be really strong next year, especially if rates go in the right direction.”
Claire Boston is a Senior Reporter for Yahoo Finance covering housing, mortgages, and home insurance.
