After several years of unpredictability, the housing market is entering a new phase. According to Compass Chief Economist Mike Simonsen, 2026 represents a meaningful step toward normalcy and not a return to the pre-pandemic market, but a more balanced, understandable one.
Compass has released its first-ever Housing Market Outlook for 2026, offering data-driven insight into the trends that will shape the year ahead. The big takeaway? The market is turning a corner, and for many buyers and sellers, opportunity is beginning to re-emerge.
A New Housing Market Era Begins
From 2020 through 2024, the housing market was defined by extremes: frozen mobility, rapid price appreciation, volatile mortgage rates, and uneven inventory across regions. Those years forced many would-be buyers and sellers to pause their plans.
In 2026, we move into a new era. Home sales are positioned to grow again, inventory is normalizing in many markets, and affordability begins to improve through steadier conditions and more realistic expectations rather than a dramatic price correction.
Buyers and sellers alike are resetting after years of uncertainty, and the market is becoming easier to navigate with confidence.
Four Signals to Watch in 2026:
1. Inventory Growth
Nationally, inventory is expected to grow by about 10%, giving buyers more choice and helping to ease competitive pressure in many markets.
2. Home Prices
Home prices are projected to rise modestly by about 0.5%, while incomes continue to grow faster. This combination supports gradual affordability improvements without destabilizing the market.
3. Mortgage Rates
Mortgage rates are expected to trade between 5.9% and 6.9%, averaging around 6.4% for the year. While rates may still fluctuate, the environment is notably more favorable than in recent years.
4. Home Sales Activity
Home sales could reach 4.25 million, a 5% increase from 2025, as improved affordability and growing inventory bring more buyers back into the market.
Affordability Improves Without a Crash
One of the most important shifts of 2026 is the slow improvement in affordability. Rather than sharp price declines, the market is rebalancing through a combination of flatter home prices, rising incomes, and easing mortgage rates.
This steadier path is healthier for the market long term and creates more sustainable opportunities for both buyers entering the market and sellers planning their next move.
The Great Stay Begins to Thaw
Since 2022, Americans have been moving far less than usual, a phenomenon known as the Great Stay. High mortgage rates, affordability pressures, and economic uncertainty led many homeowners to delay selling while many buyers waited on the sidelines.
That period of limited movement is beginning to ease. Mortgage rate lock in is becoming less of a barrier, more homeowners are reengaging with the idea of moving, and the continued flexibility of remote and hybrid work is allowing for greater mobility.
As a result, we are seeing early signs that both buyer and seller activity is building beneath the surface.
Regional Differences Still Matter
The effects of the past few years weren’t felt evenly across the country, and that remains true in 2026. Inventory levels, competition, and time on market will vary significantly by region.
The Northeast has generally experienced tighter supply, while parts of the South and West have seen more inventory growth. For buyers and sellers, understanding local conditions, not just national headlines, will be critical.
Shadow Inventory and Shadow Demand
One of the most telling insights from Compass data is the presence of pent-up activity waiting for the right conditions.
By late 2025, nearly 60% of listings were being withdrawn, suggesting a large group of sellers who wanted to move but ultimately held back. Compass estimates that approximately 150,000 additional homeowners are poised to sell once conditions improve.
At the same time, buyer interest remains strong. Purchase mortgage applications were up between 15 and 25 percent compared to last year, while closed sales increased by only 2 to 4 percent. This gap points to significant shadow demand, meaning buyers who are ready, watching, and waiting.
The Big Picture for 2026
After years of disruption, the housing market is stabilizing. Prices are flattening, rates are easing, inventory is growing, and sales activity is expected to rise for the first time since the pandemic era.
As Compass Chief Economist Mike Simonsen puts it:
“The market is shifting toward a new era where incomes rise faster than home prices and the deep freeze of the last few years begins to thaw.”
For anyone considering a move in 2026, the coming year may finally offer the clarity and opportunity that has been missing.
If you’re curious how these national trends translate to your neighborhood or personal goals here in the DC area, our team at Pearlman Meekin & Co. is always happy to talk through what this evolving market means for you.
