As 2025 draws to a close, new projections from Zillow Research indicate a period of stabilization for the U.S. housing market, with modest gains in home values expected through 2026. According to the December 2025 Zillow forecast, home prices are anticipated to rise by approximately 1.7% over the next year, signaling a marked departure from the dramatic price surges seen during the pandemic years and the volatile fluctuations that followed.
The forecast suggests the real estate market is entering a more tempered phase, where balance between supply and demand plays a central role. Instead of the sharp increases that once characterized post-pandemic recovery, the expected growth reflects a return to more sustainable patterns. Zillow’s forecast also projects a slight increase in the number of existing home sales. After an estimated 4.1 million existing home sales in 2025, that number is expected to rise to around 4.3 million in 2026. Though this increase may seem modest, it marks a hopeful sign for market activity after a prolonged period of constrained transactions caused by affordability issues and limited housing supply.
A significant factor influencing this outlook is the evolving landscape of mortgage rates. While still higher than historic lows seen during the early 2020s, borrowing costs have begun to ease, thanks to slowing inflation and more cautious monetary policy from the Federal Reserve. This gradual decline in mortgage rates may encourage more buyers to re-enter the market, especially those who had previously been priced out. At the same time, increasing inventory levels are giving prospective buyers more choices and reducing the intense competition that once fueled bidding wars.
The availability of more housing inventory is another critical development. During the height of the pandemic-era housing boom, the market suffered from a severe supply shortage, driving up prices and shutting many buyers out. In 2026, however, supply constraints are expected to ease slightly, contributing to slower home value growth. Builders have been responding to the demand with new construction, and more homeowners are considering listing their properties now that the refinancing boom has cooled.
For homeowners, this new environment offers a level of predictability that has been missing in recent years. The forecasted appreciation in home values, while not dramatic, means homeowners can still expect gradual gains in equity. This could be particularly reassuring for those who purchased homes at elevated prices during the recent peak and are concerned about maintaining their investment value. In contrast to the uncertainty of previous years, a 1.7% annual increase offers a sense of stability without the market overheating.
Buyers, especially first-time entrants, may also find 2026 more navigable. With more homes available and less aggressive price growth, the pressure of entering the market may ease somewhat. Although challenges remain—particularly around down payments and qualifying for mortgages—the overall outlook is more favorable than in previous years. Still, affordability remains a pressing concern in many parts of the country, particularly where housing costs have historically outpaced wage growth.
In the rental market, Zillow’s forecast anticipates slower growth or even modest declines, particularly in multifamily housing. Single-family rental prices are projected to increase slightly, by about 1.6%, while multifamily rents could decline by up to 1% year-over-year. This cooling trend in rent prices follows years of strong growth and reflects broader shifts in supply and demand. As more multifamily units come onto the market and tenant demand levels off, landlords may find it harder to raise rents aggressively.
This trend could provide some relief to renters who have seen costs soar in recent years. With rent stabilization, more households may be able to save for homeownership, especially if wages continue to rise and inflation moderates. However, the decision between renting and buying will remain complex, influenced by individual financial circumstances, interest rates, and regional market conditions.
Nationally, the housing market’s outlook will continue to be shaped by broader economic factors, including job growth, consumer confidence, and fiscal policy. As of the end of 2025, inflation appears to be under control and economic growth remains steady, which bodes well for continued housing market resilience. However, any unexpected economic disruptions could alter the trajectory of these forecasts.
Regionally, the pace of growth will likely vary. Areas that experienced explosive price increases during the pandemic, such as parts of the Sun Belt, are seeing a slowdown, while some previously overlooked markets in the Midwest and Northeast are experiencing more consistent, sustainable growth. These regional disparities will continue to define the housing landscape, as affordability and availability differ widely across states and cities.
In summary, Zillow’s forecast for 2026 envisions a housing market marked by modest but meaningful growth, a slight rise in home sales, and a potential softening in the rental market. This period of stabilization could offer both homeowners and buyers a reprieve from the uncertainty of the past several years, as the housing market adjusts to a new normal driven by economic fundamentals rather than speculative surges.
