With mortgage rates stuck above 7%, the 2026 housing outlook looks much dimmer for would-be buyers. That backdrop has pushed National Association of Realtors chief economist Lawrence Yun to abandon the stronger rebound he once expected.
Here's what to know
In remarks to Realtor.com, Yun said the resale market should see only minimal improvement in 2026, with both sales volume and prices up roughly 2% or less versus 2025. He now expects newly built homes to do worse, with new-home sales down 5% from 2025.
The new estimate is a major step down from his earlier forecast. In November, Yun had forecast a 14% jump in existing-home sales from the prior year's three-decade low and a 4% gain in median prices, before cutting the sales-growth view to 4% in April.
He said higher borrowing costs drove the downgrade. "The big unpleasant event over recent months is the fast-rising mortgage rates, therefore further denting the market outlook," he told Realtor.com.
Yun had expected mortgage rates to average about 6.5% in 2026, but they have stayed above 7% since late September. At the Mortgage Bankers Association's annual conference, Mike Fratantoni, the group's chief economist, said rates are likely to run near 7.3% for the remainder of 2026 and stay above 7% into 2027.
More background
Realtor.com's economic research team struck a similar note in its July midyear update for the 2026 housing market, forecasting only a 1.2% rise in existing-home sale prices by the end of 2026 because of inflation, higher oil prices tied to the war in Iran, and rising interest rates.
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Yun has highlighted many of the same pressures, including high interest rates, inflation, and economic uncertainty related to the Iran war. Since even small rate increases can meaningfully lift monthly payments, mortgage moves have an outsized effect on affordability.
He also expects the new-home market to lose ground as financing costs pressure both buyers and builders.
Fratantoni described the forces keeping rates elevated this way: "Inflation is too high, leading central banks to raise short-term rates, while budget deficits and debt are unsustainably high, leading bond investors to push up longer-term rates."
What can be done?
At an appearance before Las Vegas Realtors, Yun said a healthier housing market still depends most on lower mortgage rates, and according to the Review-Journal, he called interest rates "the magic that drives the market."
In his view, buyers currently waiting could return in 2027 if rates fall. "If somehow at the beginning of 2027 we see mortgage rates closer to 6%, we will see good buying activity at that time," Yun said.
Yun also argued that a recession, while harmful across much of the economy, could unexpectedly help housing if it pushes rates lower. "In all past economic recessions — other than the subprime blowout — the interest rates moved down and home sales increased more in a recession than a nonrecession," he said.
Many would-be buyers may keep holding off, hoping borrowing becomes less expensive, even if home prices do not decline much.
Yun said the housing market remains highly vulnerable to forces far beyond any one buyer or seller: "There's so much uncertainty on geopolitics and, of course, the artificial intelligence and data center boom that is currently occurring," Yun said. "What if it turns into a bust? It's going to create a different dynamic."
Where can I learn more?
High rates and affordability pressure are showing up across the housing market in different ways. These stories look at riskier mortgage choices, regional sales swings, and buyers getting squeezed by prices.
• Across the U.S., riskier mortgages are spreading as higher rates keep applications falling.
• In Western Massachusetts, home sales climbed sharply as Pioneer Valley demand jumped over 25%.
• In Jacksonville, new-home premiums nearly vanished, with some builds now cheaper than resales.
• In Frisco, Texas, home prices fell hard, with some sales down 26% from 2022.
• In Utah, rising prices locked out 91% of renters from buying homes.
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