4 predictions about the housing market in 2026

4 predictions about the housing market in 2026

The 2026 housing market is shaping up to be a year of recalibration rather than resurgence or decline. After several years marked by extreme volatility—including rapid price appreciation, sharp rate increases, and persistent inventory shortages—the landscape is finally beginning to steady.

While mortgage rates eased slightly in late 2025, they remain well above the lows that shaped buyer behavior during the pandemic. For homeowners, 2026 is unlikely to deliver a "reset" moment in the form of rock-bottom rates or sharply lower prices. Instead, as borrowing costs remain elevated, this will be a year to prioritize making your existing home and mortgage work harder for you.

Splitero shares four key predictions for the 2026 housing market.

1. The ‘lock-in’ effect will persist

Most forecasts suggest that mortgage rates will remain above 5.5% through 2026. Projections cluster around the high-5% to above-6% range; a modest relief, but a far cry from the sub-3% rates of 2020-2021. Recent data supports this outlook: The Intercontinental Exchange’s (ICE) conforming 30-year rate index dipped to roughly 6.2%-6.3% in late 2025.

As of Q2 2025, the average mortgage rate for existing mortgage holders was 4.3%, according to the U.S. Federal Housing Finance Agency. Additionally, Realtor.com reported in August that more than 81% of mortgaged homeowners were holding rates below 6%, which explains why many homeowners may continue to hold tight to their existing low-rate loans.

The disparity between today’s rates and those of existing homeowners does not incentivize mobility. For example, if you purchased a $450,000 home in 2020 with a 3% mortgage rate and a 20% down payment, your monthly payment would be $1,518. Purchasing that same home today at a 6% rate would push that payment to $2,158. Because of this math, borrowers who locked in pandemic-era rates are unlikely to move in large numbers.

2. A mini wave of refinancing for recent buyers

While the broader market remains locked in, modest rate changes have triggered a surge of activity among a specific group: homeowners who purchased during the high-rate period of 2023-2025.

According to the Intercontinental Exchange’s December 2025 Mortgage Monitor, rate-and-term refinances accounted for 62% of all refinance activity in October, representing the highest share in nearly five years. Notably, an estimated 95% of these transactions involved loans originating from the 2023-2025 era, with the average refinancer carrying a balance of $505,000 and a credit score of around 762.

When there is a clear financial benefit, homeowners are eager to restructure their loans. However, these opportunities are concentrated among borrowers who can qualify under today's strict credit and income standards. Therefore, we will likely see a small wave of refinancing activity from homeowners who qualify. However, homeowners with unconventional income, retired homeowners, or those with lower credit scores may be unable to refinance.

3. A buyer-seller disconnect will keep inventory from fully normalizing

Even if rates ease, 2026 is unlikely to turn into a wide-open, buyer-friendly market because of a growing disconnect between what sellers think their homes are worth and what buyers are willing (or able) to pay in today’s interest-rate environment. As inventory has increased and homes have taken longer to sell, many sellers are opting to step back rather than accepting lower offers, removing listings from the market, or postponing plans to sell until pricing feels “right” again.

That tension showed up throughout 2025: Days on market stretched into the 50-70 day range, and while active listings rose month over month for much of the year, total inventory still didn’t return to pre-pandemic norms and began to stall by October. Realtor.com’s analysis found that, despite a 15.3% year-over-year increase in active listings in October 2025, total inventory remained about 13% below the 2017-2019 average for that month.

This dynamic helps explain why a cooling market doesn’t automatically translate into broad price declines. Buyer demand has come off peak levels, but sellers’ willingness to hold firm, or withdraw listings altogether, keeps supply effectively constrained. The result is a market where price growth may be muted, but meaningful, widespread price drops are harder to sustain.

4. Homeowners will seek new ways to access equity

Despite affordability pressures, homeowners are sitting on a record amount of wealth. Entering Q3 2025, U.S. homeowners held $11.6 trillion in accessible home equity according to the Intercontinental Exchange’s August 2025 Mortgage Monitor. However, accessing that wealth through traditional means is becoming increasingly difficult.

While rate-and-term refinance activity has surged for homeowners who bought during the rate peaks of 2023-2025, those refinances don’t offer access to cash. For homeowners wanting to access their equity, traditional options such as cash-out refinances and HELOCs often require taking on a new, higher monthly payment. They also come with strict qualification hurdles.

• High Credit Standards: In Q3 2024, Experian found that the average FICO score for HELOC borrowers in most states was around 800. Federal Reserve data shows the majority of mortgage originations since 2020 have clustered around credit scores of 720 or higher.
• Income Barriers: Even with excellent credit, traditional lenders require verifiable income, making it difficult for self-employed individuals or retirees to qualify.

For homeowners who are “house rich but cash poor,” alternatives like home equity investments (HEIs) are filling this gap. These solutions enable homeowners to leverage their equity without taking on monthly payments or needing high credit scores, offering a vital path for homeowners looking to fund renovations or consolidate debt in 2026.

How homeowners can navigate 2026

The year ahead may not bring big swings, but it does bring something valuable: a bit more predictability than we’ve had in a while. That said, navigating this landscape still requires intention.

If you’re a homeowner entering 2026, it can help to:

• Evaluate your long-term housing needs. If you’re considering moving, weigh the costs of selling and buying against staying put and making improvements for a time. With market rates still elevated, improving your lifestyle at your current address may be the more prudent approach.
• Reassess your home-equity strategy. If your loan was originated during the 2023-2025 period and interest rates decline, a simple rate-and-term refinance may help lower your payments and strengthen your overall financial position. If you have an older, ultra-low-rate mortgage or more complex finances, it may be worth exploring options like HEIs that don’t require taking on another monthly payment.
• Plan for gradual, not dramatic, relief. Affordability gains will likely be incremental. Budget conservatively, secure financing early if needed, and anticipate a slower-moving market when selling or buying.

In a recalibrating market, small, well-timed decisions often matter more than big, dramatic moves. The goal for 2026 is less about waiting for a perfect moment and more about choosing the right moves for your situation.

This story was produced by Splitero and reviewed and distributed by Stacker.