A ‘little bit better’ housing market could be on the way in 2026, says NAR chief economist

Standing on stage in front of a cavernous hall at the George R. Brown Convention Center in Houston, Lawrence Yun made a bold announcement: “America is now open for business.”

The chief economist for the National Association of Realtors was met with an uproar of applause and cheers from his audience — real estate professionals from across the globe gathered in Texas for the industry group’s largest annual gathering, NAR NXT.

“The shutdown is over,” Yun said, referencing the record-breaking 43-day government shutdown that ended last week. “Expect some of the deals that did not go through during the shutdown to now slowly catch up.”

Yun’s overall message on Friday: Slightly better times are on the way for the housing market.

It’s a reversal from the message he delivered just about five-and-a-half months ago at another of the group’s conferences. “The recovery has been delayed,” Yun said in June.

In Houston, though, Yun was more optimistic.

“The forecast is that it looks like this year is a bummer, no increase in unit sales at all,” he said. “Next year is really the year you see some measurable increase in sales.”

“The light is flashing at the end of the tunnel,” Yun added.

One of the biggest determinants of whether that light at the end of the tunnel will come into fruition is mortgage rates.

“We have to get a more positive interest rate environment where people are saying, ‘Oh, since I don’t need to move up, now I’m more willing because it’s affordable,’” Mark Perkins — founder, CEO and principal broker at Pivot Realty — told Homes.com in an interview Friday.

Yun said that’s a change that’s likely to manifest in 2026, forecasting that the 30-year, fixed-rate mortgage will fall from an average of 6.7% to 6% next year. Furthermore, he predicted the Federal Reserve would cut interest rates again in December and potentially twice again in 2026. While that’s not directly related to mortgage rates, Fed decisions send ripples through the economy that typically extend to the mortgage market.

“As we go into next year, mortgage rates will be even a little bit better,” he said. “I definitely am using the adjective ‘little bit better.’ It’s not going to be a big decline, but you will still see some modest decline that will help improve some affordability.”

It’s important to remember, though, that Yun made a similar prediction last year, forecasting that rates would end 2025 around 6%. Instead, mortgage rates spent much of this year closer to the 7% threshold. As of Thursday, the average 30-year, fixed-rate mortgage was 6.24%.

National Homes.com market data has shown modest increases in home prices for the past several months, sticking in the singular digits and landing on a median home price of $385,000 in October.

But prices are not in a risk zone, said Yun, nor will they be next year.

“Home prices are essentially at a solid ground. Any price decline appears to be temporary oversupply, as it’s happened here in the Houston region,” he said, referencing the high level of inventory spurred from pandemic-induced buyer demand for the Sun Belt. In response, that demand was also met by homebuilder activity.

Yun said home prices nationally increased 3% this year, and next year will increase by 4%. A 4% increase from October’s median price would push median prices up by $15,400.

“Home prices nationwide are in low danger of declining. Some cities, yes, but probably temporary,” he said.

This past year posted an unfortunate zero percent increase in existing home sales and a 2% decline in new home sales, according to Yun, but that’s a reality lived by many agents working in the industry.

What’s hopeful and promising increased sales, the economist said, is the high share of mortgage application activity.

“Mortgage applications, even though some are not mortgage approvals, has been consistently above last year, implying that peoples’ desire to enter the market has been consistently positive,” he told the crowd. “They just want a little lower mortgage rate, more inventory to get the deals done.”

With that, Yun predicted a 14% year-over-year increase in existing home sales, and a modest 5% uptick in new home sales.

But from the frontline, that increase might not be enough to retreat to normalcy, suggested agent Anthony Lamacchia of Lamacchia Realty in Plantsville, Connecticut. For the New England agent, the most exciting prospect is what lies beyond 2026.

“I don’t think we’re going to see a normal year with an average amount of sales until we get to [2027], and then beyond that, we’re going to see a boom like we’ve never seen, and you can quote me on that one,” he told Homes.com in an interview. “It will be a boom like America’s never seen at the end of this decade.

Homes.com, part of CoStar Group, was a sponsor of the NAR show.