Zillow expects calmer 2026 housing market, improved affordability

"The housing market is finally settling into a healthier state, with buyers and sellers starting to return, said Mischa Fisher, chief economist at Zillow. Buyers are benefiting from more inventory and improved affordability, while sellers are seeing price stability and more consistent demand. Each group should have a bit more breathing room in 2026. Zillow projects U.S. home values will increase 1.2% in 2026 after a flat 2025."

"The real estate portal expects mortgage rates to stay above 6% through next year. The company says its accuracy in forecasting shelter inflation a major component of consumer inflation gives it confidence in that outlook. Modest rate relief this year improved affordability to the best level in three years, and economists expect gradual easing to draw more buyers back even if pandemic-era lows are unlikely to return."

"Zillow forecasts 4.26 million existing home sales in 2026 up 4.3% from this year's projected total. Analysts said years of limited inventory and high borrowing costs have created pent-up demand that could begin to release as affordability improves. Economists expect 2026 to be the weakest year for single-family housing starts since 2019, after a sluggish 2025. A large supply of newly built homes already on the market, along with projects still underway, is prompting builders to hold back on new starts."

U.S. home values are projected to rise 1.2% in 2026 following a flat 2025, with stabilizing prices reducing underwater homeowners. Mortgage rates are expected to remain above 6% through next year, while modest rate relief has improved affordability to the best level in three years. Existing home sales are forecast to increase to about 4.26 million in 2026 as pent-up demand responds to better affordability. Single-family housing starts are expected to weaken, potentially falling to the weakest level since 2019, as a large supply of newly built homes and projects in progress prompt builders to pause new starts and offer incentives.

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