As 2025 concludes, Zillow has released its latest national housing forecast, signaling a measured and steady recovery for the U.S. real estate market in the coming year. The company’s late-December projections anticipate a modest 1.7 percent increase in home values for 2026—a figure that underscores a shift away from the volatile swings seen during the pandemic era. After a year characterized by slow price appreciation, constrained buyer activity, and affordability concerns, the outlook for the next 12 months suggests cautious optimism among industry analysts.
Zillow’s forecast points to a slight uptick in existing home sales in 2026. While the anticipated gains are not dramatic, they represent a reversal from the subdued performance seen throughout much of 2025. Sluggish sales were largely attributed to elevated mortgage rates and high home prices, which pushed many potential buyers to delay homeownership plans. The forecasted increase in sales activity is expected to come as mortgage rates begin a gradual decline, helping to ease affordability burdens and reinvigorate demand.
The broader economic backdrop is also expected to play a role in shaping the housing landscape. With inflationary pressures easing and the Federal Reserve signaling a possible pivot toward rate cuts, financing conditions are likely to improve slightly in 2026. Zillow projects that these factors will help bring more buyers back to the market and improve transactional momentum, particularly in areas where home prices have remained relatively stable.
Regional dynamics will continue to influence national trends. According to Zillow, the Southeast and certain Western markets are poised to lead the recovery. Cities in states such as Florida, Texas, and Arizona—where job growth remains strong and cost-of-living remains competitive—may see higher-than-average gains in home values and sales. These regions are benefiting from continued population migration, robust construction activity, and lifestyle preferences that emerged more prominently during the pandemic.
On the rental front, Zillow expects growth to slow in both the single-family and multifamily housing sectors. After a period of sharp rent increases during and after the pandemic, many urban and suburban rental markets are now adjusting to rising vacancies and increased supply. This deceleration in rental growth could provide some relief to tenants, especially in metro areas where rents had previously outpaced wage growth. At the same time, more moderate rental trends may also impact investor strategies, especially those focused on single-family rental portfolios.
The forecast highlights a number of structural challenges still facing the U.S. housing sector. Chief among them is the ongoing affordability crisis, particularly for first-time buyers. Even with modest home price gains, many Americans continue to struggle with down payments, closing costs, and qualification hurdles amid tighter credit standards. Zillow’s analysts suggest that affordability will remain a key constraint on market growth until wages rise further or financing options expand to include more flexible terms for lower-income borrowers.
Homeowner behavior is also expected to influence the pace of recovery. Many current homeowners, locked into ultra-low mortgage rates secured during the pandemic, have been reluctant to sell and take on higher-rate loans. This “rate lock-in” effect has contributed to a limited supply of homes for sale, especially in mid-tier and entry-level price brackets. However, if rates drop more substantially in the coming year, more of these homeowners could reenter the market, helping to boost supply and balance demand.
Zillow’s 2026 projections offer a tempered view of the housing market—one that avoids predictions of either boom or bust. Instead, the real estate giant foresees a slow and stable climb, supported by favorable macroeconomic conditions, modest price appreciation, and a cautious rebound in buyer confidence. While challenges remain, particularly around affordability and inventory, the overall tone of the forecast is one of progress rather than stagnation.
For homebuyers, sellers, investors, and industry professionals, Zillow’s analysis provides a useful framework for navigating the coming year. The company’s projections encourage realistic expectations while acknowledging the shifting dynamics of post-pandemic real estate. As the housing market moves into 2026, stakeholders across the board will be watching closely to see if modest improvements give way to more sustained momentum.
