The Outlook for Mortgage Rates, Home Prices in 2026, According to Redfin

Next year could mark a new chapter for the US housing market, according to Redfin.

Economists at the real estate listings site said they believe the market is heading for a “reset” period at the start of next year. That could entail affordability gradually improving and more home buyers trickling into the market, the firm wrote in a report on Tuesday.

“The Great Housing Reset will take shape in 2026. It won’t be a quick price correction, and it won’t be a recession,” Chen Zhao, the head of economics research, and Daryl Fairweather, the chief economist at Redfin, said.

Zhao and Fairweather said they’re eyeing a handful of trends unfolding in the housing market over the next year. Here are some of their top predictions for 2026:

1. Mortgage rates will tick lower

Borrowing costs for home buyers are expected to ease slightly in 2026, but remain in the low-6% range, Redfin economists said.

The firm is predicting that the 30-year fixed mortgage rate will average around 6.3% in 2026, down from 6.6% in 2025.

Zhao and Fairweather pointed to “lingering inflation risk” and the likelihood that the US will avoid a recession, which could keep the Fed from cutting rates as much as some investors are pricing in.

“That’s why rates may dip below 6% occasionally, but not for any meaningful period,” they wrote.

2. A refinance boom is coming

Marginally lower rates are still expected to spur a huge burst of refinancing activity as those who purchased homes recently seek to lower their borrowing costs. Mortgage refinance volume is expected to surge more than 30% year-over-year to a total of $670 billion, per Redfin’s forecast.

Around 20% of homeowners who have a mortgage are tied to a rate above 6%, the firm estimated.

Refinancing activity saw a brief surge as the Fed resumed its rate-cutting cycle in 2025. Refinance applications jumped 58% in the week leading up to the Fed’s September rate cut, according to data from the Mortgage Bankers Association.

3. Home price growth will slow

Home prices will continue to climb, but at a slower pace compared to this year.

Prices are expected to increase around 1% year-over-year in 2026, compared to a 2% increase in 2025, according to Redfin’s forecast.

Wage growth, meanwhile, is expected to hold steady at around 4%.

“Homebuying will become more affordable because home prices will grow slower than wages for a sustained period for the first time since the aftermath of the financial crisis,” the firm said. “The small price increase combined with mortgage rates dipping lower than they were in 2025 means monthly housing payments will grow slower than wages, too.”

4. Homebuying activity will pick up

Home sales are on track to increase slightly as more buyers are drawn into the market. Around 4.2 million existing homes on the market will be sold in the coming year, per Redfin’s projections, up from a seasonally adjusted 4.1 million in 2025.

That’s due to factors like lower mortgage rates and slightly improved affordability, which can be enough to spur some prospective buyers who were on the fence about buying a home this year, the firm said.

The housing market has been mired in a yearslong deep freeze as buyers are discouraged by high costs and sellers are unwilling to lower asking prices. The pace at which US homes changed hands dropped to its lowest in at least 30 years over the first nine months of 2025, according to a previous Redfin analysis.

5. More roommates, fewer babies

Housing affordability won’t improve enough next year to stop younger Americans from getting together with roommates and to put off having children, Redfin said.

The real estate listing site said it expected homeownership rates among Gen Zers and millennials to remain flat in 2026, continuing a trend from the prior year.

“Household makeup will shift further away from the nuclear family, with more adult children living with their parents and vice versa. We also expect more friends to pool resources to buy homes together, often with prenup-style agreements,” they wrote.

Around 6% of Americans said they moved in with their parents due to affordability struggles, while another 6% moved in with roommates, according to a survey Redfin commissioned in May of this year.

“We also expect high homebuying costs to make families smaller. The fertility rate has been gradually declining for years, and it’s expected to continue falling,” they added.

6. AI will become a big part of homebuying

AI is expected to become a “matchmaker” for house hunters, the firm said, pointing to artificial intelligence tools that can help homebuyers pin down properties that meet their budget and other needs.

“Instead of a typical geographic search, homebuyers will search for precisely what they want and have a back-and-forth conversation with search sites, giving feedback to tailor their search results,” they wrote.