Preparing for the housing market in 2026
The housing market is incredibly volatile, making it difficult to accurately predict what will happen in 2026. Knowing the factors that affect the market and how the market has changed in the past 12 months is the best way anyone can prepare themselves for entering the market in the coming year.
The three main storylines that will define your homebuying journey in 2026 are mortgage interest rates, home prices and the inventory of homes for sale. The good news is that each of them offer us a trendline that we can extrapolate into the new year and hopefully glean some insights about what homebuyers can expect in 2026.
Are you thinking of making 2026 the year to buy a home or refinance your mortgage? Start by getting preapproved and read on to learn what’s likely to shape the housing market in the new year.
Rates up or down?
When looking back over the last 12 months, one thing that stands out in the housing market is the drop in mortgage rates. At the end of the year, the Federal Reserve recommended cutting Fed Funded interest rates to the lowest level since 2022 to the range of 3.5% to 3.75%. This is the interest rate that banks use when lending to one another, and it affects many parts of the economy, including mortgage rates in an indirect way.
The Fed’s first cut wasn’t until September, when it announced a 0.25% cut. Mortgage rates came down to their lowest point of 2025 during that time and have stayed lower since.
Mortgage rates are incredibly hard to predict, as so many elements are considered when lenders decide on them. That’s in addition to the factors in your control that can end up affecting the rate you get, like your credit score. So, we’ll include a roundup of the views of other housing market experts.
National Association of Realtors® (NAR):
Mortgage rates at 6%
“As we go into next year, the mortgage rate will be a little bit better,” NAR Chief Economist Lawrence Yun said. “It’s not going to be a big decline, but it will be a modest decline that will improve affordability.”
The Mortgage Bankers Association (MBA):
Mortgage rates between 6% and 6.5%
“We expect that wages are going to be growing faster than rents and going to be growing faster than home prices,” said Mike Fratantoni, chief economist and senior vice president of research and business development at the Mortgage Bankers Association. “So that, in combination with mortgage rates staying stable, should make it slightly easier over time for folks to afford that housing payment.”
Realtor.com:
Mortgage rates to average 6.3%
“We expect the average 30-year fixed mortgage rate to remain roughly in this range throughout 2026, averaging 6.3%, as slowing economic growth and the end of the Fed’s quantitative tightening offset rising U.S. government debt and inflationary pressure that’s expected to be temporary.”
Fannie Mae:
Mortgage rates to average 6.0%
Back in September, economists at Fannie Mae predicted mortgage rates would drop just below 6%.
Dealing with higher rates
If interest rates rise higher than predicted in 2026 or they aren’t as low as you were hoping, there are a few things you can do to bring your rate down. Let’s look at a few ways:
- RateReduce: RateReduce temporary buydown allows you to keep your payments lower foro up to 3 years with the help of the seller. An upfront deposit at closing allows your mortgage rate to essentially be “bought down” for a specified period. We offer five RateReduce programs to help you ease into your new home and mortgage payment as you build equity.
- Adjustable Rate Mortgage (ARM): ARMs offer the potential for lower monthly payments at the beginning of the loan. With an initial fixed-rate period (usually for five, seven or 10 years) featuring a low introductory rate, it is followed by a variable-rate period for the remainder of the loan.
- Paying points: You can save on your monthly mortgage payments by paying a little more at the beginning of the loan*. This is known as buying down the rate or paying points. You pay your lender extra money on top of your closing costs and down payment and in return, they will reduce your mortgage rate. This could save you thousands over the life of the loan.
No matter what happens with mortgage rates this year, there are many ways you can improve your mortgage rate situation, particularly with a refinance. But when you find a house you love, don’t wait for mortgage rates to come down because you don’t want to miss out.
Home prices likely to keep heading up
One of the reasons that homeownership is such a smart financial decision is that the value of homes usually keeps going up. And while that’s great news for homeowners, that makes it harder for homebuyers, particularly first-time homebuyers. That trend seems likely to continue in 2026.
Here’s what various experts are predicting:
NAR: 4.0%
MBA: 0.3%
Realtor.com: 2.2%
Fannie Mae: 2.0%
While home prices are still going up, it’s good news for buyers that they are rising at a slower pace.
Outsmarting higher home prices
Higher home prices can make saving for a down payment feel challenging, but we’re here to help. From state and federal programs to options tailored to specific neighborhoods or occupations, there are plenty of down payment assistance programs designed for first-time homebuyers. Connect with a local lending expert to explore your options and take the first step toward homeownership.
Good news on finding a home to buy
Good news for homebuyers in 2026, housing inventory next year is predicted to rise.
While the exact number of new homes on the market in 2026 changes with different organizations, predictions of rising inventory in 2026 sit around 10%. Let’s look at a few exact predictions:
- Realtor.com: 8.9%
- Bright MLS: 10.9%
- Compass: 10% - 15%
While more homes for sale is great news for a market starved for them, it still pays to move fast to beat your competition. That’s why we recommend starting your home search by getting a PowerBid Approval, so you’re ready to make an offer when you find the home you love. And pairing that with our Same Day Mortgage will allow you close quickly as well.
Are you ready for the 2026 housing market?
As we look ahead, many housing experts are optimistic that 2026 could bring some positive changes to the market, particularly with mortgage rates. However, challenges remain. That’s why preparation is key if you’re hoping to enter the housing market next year.
Start by getting a pre-approval to prepare yourself for the 2026 housing market. A pre-approval will show you the terms of your loan and amount you can borrow before you even start looking for a home.
Get ready for buying a home in 2026 by starting your application for a pre-approval today!
*Savings, if any, vary based on the consumer’s credit profile, interest rate availability, and other factors. Contact Guaranteed Rate Affinity for current rates. Restrictions apply.
Applicant subject to credit and underwriting approval. Not all applicants will be approved for financing. Receipt of application does not represent an approval for financing or interest rate guarantee. Refinancing your mortgage may increase costs over the term of your loan. Restrictions may apply.
Savings, if any, vary based on the consumer’s credit profile, interest rate availability, and other factors. Contact Guaranteed Rate Affinity for current rates. Restrictions apply.
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