Housing Market 2026 Forecast: Home Prices, Mortgage Rates, and Whether to Buy Now or Wait

Key takeaways

• Inventory is still thin. Thin housing inventory keeps home prices firm even while parts of the real estate market cool.
• Supply today is nothing like 2007. Months of supply sat around 9.4 months in December 2007 versus about 3.5 months in January 2025, a swing that supports pricing power.
• Starter homes are missing in action. Since 2010, the U.S. has underbuilt 15 to 19 million starter homes, which sits at the core of today’s affordable housing crunch.
• Rates set the payment, not the market’s backbone. Mortgage rates shape budgets, but pricing is still ruled by supply and demand in most places.
• Waiting usually costs more. Compound price appreciation and rent inflation push the starting line farther away the longer you sit out.

Housing Market 2026 Forecast: Buy Now or Wait?

If you are looking to buy a home and wondering whether to act now or wait, it usually makes sense to act now. Do not count on a decrease in home prices in 2026. U.S. home prices have increased in most years since 1945, with declines rare at roughly one year out of twelve. History shows that waiting often costs more in a tight housing market with low housing inventory and steady demand.

Compound Growth And Why Waiting Often Costs More

Here is the part most buyers overlook. Each year you wait, even a 1 percent rise in home prices pushes your target higher. If values climb 3 to 5 percent per year, the gap widens fast. You are not only missing one year of price appreciation. You are starting from a higher price every year after that. Add rent inflation, and sitting out drains savings while the real estate market moves on.

The Real Story: Supply Is Thin, Demand Is Stubborn

Listings are higher than the rock bottom levels we saw, but the housing market is still living with low inventory. A small bump from near zero does not equal normal supply, which is why home prices stay sticky in many markets.

Buyers did not vanish. They adapted. Millennials are in peak buying years, first time homebuyers remain active, and many shoppers have trimmed their target price to match mortgage rates. In plenty of areas, when new homes for sale hit the market, roughly one in three goes under contract quickly in popular price ranges. That is what tight housing inventory does.

Inventory Then And Now

Here is a quick comparison that explains a lot. In December 2007, months of supply for existing homes sat near 9.4 months. In January 2025, it was about 3.5 months. Fewer months of supply means more buyers chasing fewer listings, which supports home prices even when the housing market cools. A balanced market is typically four to six months, and many places today hover a touch above four months, which still gives sellers some advantage.

Why 2025 Is Not 2008

Back then we had oversupply and loose lending. Today the picture is different on both counts.

• 2008 oversupply: Rapid building and speculation left too many homes on the shelf. When the economy weakened, prices cracked under the weight of excess inventory.
• 2025 shortage: New construction has not caught up, and demand outpaces supply in many cities, which keeps housing inventory tight and props up prices.

Lending Standards Grew Up

Most conventional loans follow Fannie Mae and Freddie Mac guidelines. Typical requirements include a minimum credit score around 620, a minimum down payment about 3 percent, and a maximum debt to income ratio near 43 percent that can stretch to 49 percent with strong compensating factors. Tighter underwriting reduces default risk and helps prevent the kind of spiral the market saw before.

The Starter Home Shortage No One Can Ignore

Since 2010, the United States has underbuilt starter homes by an estimated 15 to 19 million units. That gap pushes first time homebuyers into mid priced tiers, keeps renters renting longer, and fuels rent inflation. Filling a shortfall that large takes years, policy changes, and significant investment, so a sudden wave of cheap new construction is not realistic.

Rates Matter, But They Are Not The Whole Story

Mortgage rates change monthly payments and force buyers to recalibrate, but on their own they have not produced large nationwide price drops in the periods discussed in these sources. Supply and demand still carry most of the weight. Real estate is local, so check neighborhood months of supply, job trends, and new construction before you decide.

Bottom Line

If the payment, mortgage rate, and budget work for your situation, buying now is usually smarter than waiting for a perfect deal the real estate market is not set up to deliver. If your timeline is short, renting can be the safer option. Either way, make the call with clear eyes. Low housing inventory, a severe starter home shortage, and steady demand are the facts on the ground.

Frequently Asked Questions

Will home prices drop in 2026 or hold steady?
 Most signals point to stability with flat to modest growth, not a broad decline, because housing inventory remains tight and demand is steady.

Is now a good time for a first time homebuyer?
 If the monthly payment works with today’s mortgage rates, buying now can beat waiting, since price appreciation and rent inflation raise your future starting point.

How much inventory counts as a balanced market?
 Typically four to six months of supply. Many areas are just over four months old, which still leans toward sellers and supports prices.

Why is there a starter home shortage?
 Since 2010, new construction has lagged at the entry level, creating a 15 to 19 million unit shortfall that fuels today’s affordable housing crunch.

Do higher mortgage rates cause prices to fall?
 Rates change what buyers can afford, but pricing is driven more by supply and demand than by rates alone in the periods discussed in these sources.

Should I wait for more listings before I buy?
 Even with more homes for sale than the absolute lows, inventory is still below normal. In many markets, about one in three fresh listings sells quickly, which keeps the housing market competitive.

Conclusion

The picture is clear. Low housing inventory, a long running starter home shortage, and steady demand keep pressure under home prices even as parts of the real estate market cool. Mortgage rates shape budgets, but supply and demand still do most of the pricing work. If your monthly payment and mortgage rate fit your budget, waiting for a bargain can backfire because price appreciation and rent inflation raise your starting point. If your timeline is short, renting can be the smarter call. Either way, make your decision with local data in hand. Check months of supply, recent new construction, job trends, and how quickly fresh homes for sale go under contract. The market is not set up for a big reset right now, so plan for stability, shop carefully, and move when the numbers make sense.