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Zillow's Positive Forecast for the Housing Market in 2026

As we look forward to 2026, economists at Zillow are projecting a notable positivity in the housing market. With an anticipated uptick in home sales and an increase in affordability, the landscape for both buyers and sellers is on the verge of transformation. This analysis serves as a pivotal point for real estate enthusiasts and stakeholders alike as they prepare for what lies ahead.

Growth in Home Sales

Zillow is predicting that existing home sales will rise to around 4.26 million in 2026, marking an increase of 4.3% compared to 2025. This projected growth is primarily fueled by a reduction in affordability barriers that have been weighing down potential buyers in recent years. As pent-up demand begins to resurface, more buyers are expected to enter the market, revitalizing interest in home purchases across various regions. Economists note the significance of this trend, as the past years have seen restrictions caused by high mortgage rates and limited inventory.

Modest Price Increases

In this hopeful forecast, Zillow also indicates a modest rise in home values, estimating a 1.2% increase nationwide. For many, this uptick in value is promising news. Unlike 2025, where 24 of the 50 largest markets experienced price declines, this trend is expected to stabilize, with only 12 markets projected to see declines in the upcoming year. This stabilization will allow homeowners to begin regaining equity, providing them with a stronger footing in the market and a much-needed sense of financial security.

Elevated Mortgage Rates Persist

Despite the positive indicators for home sales and prices, mortgage rates are expected to remain above 6% throughout 2026. While this might seem discouraging for prospective buyers, it is essential to view these figures in light of the overall market improvements. Zillow's economists have closely monitored shelter inflation, which heavily influences mortgage rates, thus giving them the confidence in these predictions. Even with rates holding firm, buyers are likely to respond positively due to increased inventory and marginally improved affordability.

New Construction Trends

On the new construction front, Zillow notes that 2026 is likely to be the slowest year for single-family home starts since pre-pandemic times, following a weak previous year. Builders may exercise caution, particularly given the substantial stock of homes that are currently available or still under construction. The current trends suggest a reduction in new project starts as builders utilize incentives to move inventory, especially where affordability issues continue.

Rental Market Dynamics

Looking at the rental market, there is an expectation for improvement in affordability as well. Zillow forecasts just a 0.3% increase in multifamily rents, giving renters significant relief and allowing for a healthier relationship between income and rent. Particularly in most major markets, individuals and families can anticipate better conditions, although places like New York City are projected to see the opposite trend, with rents expected to accelerate.

Changing Preferences Among Renters

A significant shift in renter dynamics has emerged, with an increasing number of families choosing to rent as a lifestyle choice. The latest Zillow Consumer Housing Trends Report indicates that nearly 60% of renters prefer to continue renting in 2026, even if they have the option to buy. Parents are redefining rental needs, as evidence shows that a growing proportion of renters are families with children. This trend could incentivize rental properties to include family-friendly features, such as community areas designed for children’s activities.

Embracing Energy Efficiency

With rising household expenses due to inflation, buyers are becoming more discerning about energy-efficient home features. Houses marketed with advancements such as zero-energy readiness, whole-home batteries, and electric vehicle charging capabilities could appeal more strongly to today's buyers. The spotlight on these eco-conscious features points to a burgeoning market trend that aligns with a broader societal shift toward sustainable living.

Advanced AI in Real Estate Transactions

Lastly, technology is poised to play an increasingly critical role in real estate transactions by 2026. AI is anticipated to evolve from being merely a helpful assistant to an integral part of the transaction process, managing tasks throughout the buying, selling, and renting phases. This advancement could streamline real estate processes, making transactions simpler and more predictable for all parties involved.

Overall, Zillow's optimism for the housing market in 2026 reflects a blend of enhanced buyer conditions and steady growth, marking a significant shift following years of fluctuating market dynamics. Stakeholders in real estate, from homeowners to investors, should prepare for a promising year ahead, filled with renewed possibilities and better living conditions for all.