The Big Picture
A New Housing Market emerges in 2026
2026 marks a step toward “normal.” After four years of pandemic-driven extremes — including frozen migration, volatile mortgage rates, major affordability challenges, and uneven supply across regions — the U.S. housing market enters a new era.
In this next phase, home sales are positioned to meaningfully grow again and affordability starts to improve as home prices level out and mortgage rates come down. Many of the unusual dynamics of the early 2020s are beginning to fade: mobility is slowly picking up, inventory is normalizing in many regions, and buyers and sellers are resetting their expectations after years of dramatic changes.
The Shift towards improving Affordability
After years of affordability challenges, the housing market is entering a new phase of improved affordability, not through a dramatic price correction, but through an extended period of flat home prices, rising incomes, and gradually falling mortgage rates.
Home Sales
Home sales could reach 4.25 million, a 5% increase from 2025, as lowering rates and growing inventory draw more buyers back to the market.
Mortgage Rates
Mortgage rates are expected to trade in a range of 5.9%-6.9%, with an average of about 6.4% for the year, offering buyers a more favorable financing environment.
Home Prices
Home prices are expected to rise modestly by 0.5% while incomes grow faster—conditions that would improve affordability.
Inventory
Nationally, buyers could benefit from 10% growth in the number of homes on the market, bringing more options and improved affordability.
The “Great Stay’ begins to thaw
Since 2022, Americans have been moving far less than usual, and that shift has reshaped migration patterns and housing inventory nationwide. This period of frozen mobility, known as “The Great Stay,” forced many potential buyers and sellers facing economic uncertainty and diminished affordability to delay their plans to move.
But signs of a thaw are beginning to emerge: the mortgage rate lock-in is fading, more homeowners are looking to move, and work-from-home has endured allowing for greater mobility.
“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.”
— Mike Simonsen, Compass Chief Economist
Shadow Inventory and Shadow Demand
The data reveals pent-up activity waiting for the right conditions. By November 2025, nearly 60% of listings were being withdrawn, signaling a large group of sellers who were ready to move but ultimately held back, creating a high volume of “shadow inventory.”
At the same time, purchase mortgage applications were up 15-25% year-over-year, while sales rose only 2-4%. Buyer interest far outpaced closed sales, contributing to rising “shadow demand.”
The Big Picture
After four years of frozen mobility and affordability challenges, the U.S. housing market is turning a corner. Home prices are expected to flatten, mortgage rates should ease modestly, and sales activity is positioned to grow for the first time since the pandemic. Affordability will improve gradually as incomes rise faster than prices, not through dramatic correction, but through steady rebalancing.
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