Above, Lawrence Yun and Nadia Evangelou
At the National Association of Realtors® (NAR) Real Estate Forecast Summit, held remotely Dec. 9, NAR Chief Economist Lawrence Yun predicted that the Federal Reserve will cut interest rates Dec. 10, with two more cuts next year.
But taking a longer view after multiple sluggish years for housing, Yun also offered a variety of predictions for 2026 and beyond, including that home prices nationwide will continue rising, though at a slightly slower pace than wage growth, and job gains may be more modest due to reduced immigration. He also opined that the market will see a meaningful double-digit percentage gain in sales in 2026, as lower mortgage rates allow more buyers to qualify for loans.
But Yun cautioned that in the short term, mortgage rates may not decline one-to-one with the Fed rate cuts.
“(Next year) looks to be a year of recovery, and I would project over the next 10 years that possibly eight of them could be improving given the population growth and job growth that’s happening,” he said. “Mortgage rates, affordability and housing supply are the key decision factors. Next year we will see more inventory and lower mortgage rates compared to this year.”
As part of NAR’s national outlook, Yun listed several predictions, noting that existing-home sales are forecast to increase by 14%, home prices are expected to rise by about 4%, mortgage rates are projected to decline toward 6% and job growth is anticipated to remain moderate with roughly 1.3 million new jobs.
“After three years of flat home sales, a solid double-digit percentage increase is expected in 2026,” Yun said. “In 2026, we expect higher inventory, modest improvements in affordability, and more accommodating monetary policy from the Federal Reserve will help more Americans buy their next home.”
Yun pointed out that existing-home sales have seen minimal change, with a 0.1% increase year-to-date, and are at 75% of pre-COVID levels despite increased population and job numbers. Newly constructed home sales are down 1.2% year-to-date but have returned to pre-COVID levels, while inventory is rising due to life-changing events, prompting homeowners to sell.
Whether or not there is an oversupply of houses available or a shortage was also a topic Yun addressed, blaming the media for possibly confusing the public.
“Most times the media is trying to inform the consumer in the best way possible,” he said. “But sometimes its interpretation of data can be a little bit off. Often they say that there’s more supply than demand. In fact, we have a housing shortage. We need more inventory coming onto the market. Maybe some policy changes could move it.
“Even with the recent rise in inventory, we are not back to the earlier part of the year. We always have three months, four months, five months supply of inventory. Recently it’s been about four and a half months supply, which would be considered more on the tight inventory side.”
The local aspect
Nadia Evangelou, NAR’s senior economist and director of real estate research, followed Yun’s presentation, detailing local-market metrics, noting that local trends and insights are most important to agents’ businesses.
“There is no doubt that the national outlook is incredibly helpful because it gives us the direction of the market,” she explained to the online audience. “But people don’t buy homes in the national market. They buy homes in your neighborhoods, on your streets, in your communities. So the real question for 2026 is, where will buyers actually feel the improvements, and where will the opportunities be?
“One of the biggest lessons from 2025 was that more homes on the market does not automatically lead to more home sales. If buyers cannot afford the homes that are listed, then more listings don’t create more options for them. Yes, affordability will improve in 2026 as mortgage rates lower, but affordability only turns into real activity in markets where the homes coming on the market actually match what local incomes can support.”
Evangelou presented a study identifying 10 markets expected to outperform nationally in 2026, based on factors like millennial demand, income growth, job growth and affordability. They included Charleston, South Carolina; Charlotte, North Carolina; Columbus, Ohio; Indianapolis, Indiana; Jacksonville, Florida; Minneapolis-St. Paul, Minnesota; Raleigh, North Carolina; Richmond, Virginia; Salt Lake City, Utah; and Spokane, Washington, with each offering unique strengths such as affordability, job creation and population growth. She emphasized the importance of pricing strategy and understanding migration patterns to capitalize on market opportunities, while noting that lower mortgage rates are key to stimulating sales.
“We are very close to 6% right now, and in some areas a one-point drop unlocks tens of thousands of newly qualified buyers,” she said. “Another main factor is how well listings match local incomes. We also look at price cuts, which can help us understand whether sellers are meeting buyers. Then we compare mortgage payments to rent, because when these two factors align, then renters start exploring the possibility of buying.”
