The holiday season is among us, as is the season for predictions of what’s to come next year for the housing sector.
First up, we have Redfin, the real estate brokerage company with a never-ending array of research into the housing and mortgage markets.
The Seattle-based outfit forecasts, among other predictions, that 2026 will mark the beginning of “a long slow recovery” as affordability improves because income growth will outpace growth in housing prices.
For the first time since the Great Recession — and for a prolonged period of time — Redfin predicts that next year we will see incomes rising faster than house prices.
The company expects median home prices to rise just 1% year-over-year in 2026. And with but a “small price increase” next year, combined with somewhat lower mortgage rates, buying a house “will become affordable." Improved affordability “will be significant enough to lure back some house hunters.”
Even though costs won’t be low enough to satisfy every buyer, Redfin still believes existing-home sales will end up 3% higher next year, with sales coming in at an annualized rate of 4.2 million. The spring buying season will be particularly strong, the company said.
As for loan costs, the brokerage firm thinks mortgage rates will dip to the low 6% range, down from the average of 6.6% this year.
“A weaker labor market will lead the Fed to cut interest rates in 2026, and bring monetary policy to a more neutral place,” says Redfin in their forecast.
But, Redfin warns, “lingering inflation risk and the likelihood that we’ll avoid a recession will keep the Fed from cutting more than the markets have already priced in.”
Redfin expects mortgage refinance volumes to increase more than 30% annually in 2026, ending the year at a total of $670 billion.
More Americans will refinance largely because 20% of mortgaged homeowners now have a rate above 6%, Redfin predicts.
“Those who bought recently with an elevated rate are chomping at the bit to bring their monthly payments down,” said Redfin in their report.
In another prediction of interest, Redfin believes the affordability crisis will finally unite policymakers across party lines. Numerous housing proposals aimed at alleviating the crisis — including some that would increase the nation’s housing supply, have been tossed into the hopper already. But while they will “chip away” at the issue, the “only thing that will make homes more affordable is time,” the company warns.
The brokerage firm also predicts more borrowers will refinance next year, and put money into remodeling their homes. They also predict that household makeup will shift further away from the nuclear family, with more adult children living with their parents and vice-versa, and more friends will pool their resources to buy homes together.
As for the rental sector, Redfin forecasts that apartment rents will rise as supply continues to fall. Nationwide, Redfin expects rents to rise about 2% to 3% year-over-year by the end of 2026, roughly at the same pace as inflation. At the same time, construction will continue to slow, meaning there will be fewer apartments hitting the market with more competition for each unit.
