The reply, Kushi stated, lies in six forces shaping the outlook: affordability, demographic demand, regional divergence, localized pressure, rising stock and the continued benefit for new homes.
Affordability and demographics
Mortgage rates are anticipated to stay within the low-6% vary subsequent 12 months, in accordance with a report launched this week by First American Knowledge & Analytics.
That alone won’t unlock the market, Kushi stated, however cooling home-price growth paired with earnings positive factors ought to proceed to elevate affordability.
Value appreciation has already slowed to the weakest tempo since 2012, the report confirmed. If that development holds, Kushi stated markets with rising inventory and modest price cuts may even see the reemergence of extra consumers.
By Kushi’s estimate, the U.S. logged roughly 4 million fewer existing-home transactions from 2022 to 2025 than the five-year common earlier than COVID-19. But demand is way from exhausted.
She added that almost 52 million Individuals are of their 30s, and lots of are getting into homeownership-driven life levels. Even with out main shifts in mortgage charges, household adjustments, job relocations and downsizing are anticipated to maintain transactions on a gentle uptick via 2026.
Regional gaps to carry robust
Stock traits stay break up. Kushi stated that the Midwest and Northeast proceed to see tight provide for each new and current houses, holding pricing comparatively agency.
In the meantime, many Southern and Western metros have extra lively stock than earlier than the pandemic. Markets reminiscent of Austin and Tampa noticed robust value run-ups throughout the post-pandemic increase, adopted by slower migration and affordability strains.
New-home development in these areas has given consumers extra selections and added to the cooldown.
Most analysts count on a “two-speed” market in 2026 — tight situations within the Northeast and Midwest, accompanied by softer ones throughout elements of the South and West. And rising insurance costs might add additional strain in some coastal areas.
Indicators of monetary misery have risen from document lows however stay far under disaster ranges.
Kushi stated weak factors seem primarily in areas with stretched affordability, greater insurance coverage prices or slower job growth, together with households that carry thinner monetary cushions.
“The labor market has cooled however not cracked, and householders nonetheless maintain a really giant fairness cushion, so the danger stays contained,” Kushi stated.
“In 2026, the pressure needs to be localized. Costs are slumping in some Solar Belt and Western metros that surged throughout the increase, and up to date consumers with small down funds are extra uncovered if costs slip. We are going to watch the labor market carefully, however the base case is gradual normalization, quite than a broad wave.”
Stock and builders’ benefit
The availability scarcity eased in 2025 as extra householders accepted greater borrowing prices and builders accomplished extra houses.
Kushi stated life occasions — however not rate of interest shifts alone — ought to encourage extra house owners to record in 2026. Decrease charges would assist on the margins, however the loosening of the “lock-in” impact is predicted to be gradual.
Single-family construction has cooled, however builders nonetheless profit from having move-in-ready houses and suppleness on incentives.
Many consumers stay cautious of promoting a house with a low mortgage price and getting into a dearer market, holding consideration on new houses the place sellers can supply buydowns or closing-cost assist, Kushi added.
She stated the new-home section is positioned to retain its edge as a result of provide is on the market and builders can regulate shortly to shifting demand.
“The housing market enters 2026 on steadier footing,” Kushi stated. “We count on affordability to enhance primarily as a result of costs are cooling and paychecks are rising, quite than as a result of financing all of the sudden will get low cost. Demand is powered by milestones quite than spreadsheets.”
