Zillow economists say the housing market will warm up in 2026
Economists at Zillow expect the 2026 housing market to stabilize after several turbulent years, with modest improvements in affordability and a slight uptick in home buying activity. Home values, largely flat in 2025, are projected to rise about 1.2% next year as inventory grows and buyers regain some purchasing power. While renters in most major cities should see relief, those in New York City will continue facing elevated costs. Zillow’s chief economist says both buyers and sellers will benefit from this more balanced environment, with buyers gaining from better affordability and sellers seeing steadier demand.
The forecast also suggests fewer homeowners will be underwater on their mortgages as prices firm up in more markets. Zillow predicts that the number of major metros experiencing falling home values will drop significantly in 2026. Mortgage rates, however, are expected to remain above 6%, with economists confident they won’t return to the ultra-low levels of the pandemic era. Slight rate moderation combined with stable pricing should continue improving overall affordability and encourage more buyers to reenter the market.
