The Mid-Year Housing Market Update: Why Forecasts Changed in 2026

If the housing market feels uncertain right now, you’re definitely not alone.

Mortgage rates have remained higher than many expected. Home sales haven’t accelerated the way experts anticipated. And many buyers and sellers are still wondering when the market will become more affordable and easier to navigate.

The reality is that a lot has changed during the first half of this year.

At the end of 2025, economists were forecasting a much stronger housing market for 2026. They expected mortgage rates to decline, affordability to improve significantly, and home sales to gain momentum.

However, persistent inflation, economic uncertainty, and ongoing geopolitical tensions around the world kept mortgage rates elevated. Because rates stayed higher for longer than anticipated, many buyers chose to remain on the sidelines.

As a result, housing experts have adjusted their forecasts for the remainder of the year (see graph below):

a graph of sales and sales

So, what does all of this mean for you? Let’s take a closer look.

Mortgage Rates May Stay Higher for Longer

While many buyers are hoping mortgage rates will return to the high-5% or low-6% range seen earlier this year, most experts no longer expect that to happen in 2026.

Instead, forecasts have been revised upward from the low-6% range originally projected. Many leading housing organizations now expect rates to remain in the mid-6% range throughout the year. The positive news is that rates are still lower than they were a year ago.

Of course, forecasts can change. If inflation eases or global conflicts begin to settle, rates could move lower. But if you’re delaying your plans solely in hopes of significantly lower rates, the payoff may not be as large as expected.

Existing Home Sales Forecasts Have Been Lowered

At the end of 2025, economists projected approximately 4.5 million existing-home sales in 2026. Today, that forecast has been adjusted closer to 4.2 million.

This tells us that affordability challenges continue to impact buyer activity.

Higher mortgage rates have increased monthly housing costs, making homeownership more difficult for many households—especially first-time buyers. While the pace of the market has slowed compared to earlier expectations, experts still anticipate more homes will sell this year than last year.

Many economists believe that once geopolitical concerns ease and mortgage rates stabilize, a large number of waiting buyers will return to the market. As Lawrence Yun, Chief Economist at NAR, explains:

“There is sizable pent-up demand that could be released into the market.”

There have already been encouraging signs in recent months. Pending home sales have shown month-over-month improvement despite higher borrowing costs.

If purchasing a home is financially comfortable for you today, buying now may still be worth considering. Waiting could mean facing increased competition and fewer available homes when more buyers decide to re-enter the market.

New Home Sales Have Also Slowed

Homebuilders entered 2026 expecting a stronger sales environment. Earlier projections suggested new-home sales would exceed 700,000 this year. Current forecasts now place that figure slightly below that mark.

Once again, mortgage rates are a major factor behind the slowdown.

However, this creates potential opportunities for buyers. Builders may be more motivated to attract purchasers through incentives, price adjustments, and flexible negotiations. In areas with significant new construction activity, this can be a major advantage.

Builders may be willing to offer concessions or negotiate more aggressively, giving buyers additional leverage when making a purchase.

Home Prices Are Still Expected To Increase

This remains one of the most important points in the entire forecast.

Even though sales activity has cooled, experts have largely maintained their projections for home price growth. They still expect home prices to rise nationally throughout the year.

The reason is simple: while demand has softened somewhat, housing inventory remains relatively limited in many markets. That supply-and-demand imbalance continues to support home values, even as overall activity slows.

Naturally, real estate is local, and market conditions vary from one area to another. Some regions are experiencing more cooling than others. But on a national level, experts are still forecasting steady appreciation rather than significant price declines.

That should provide reassurance to both buyers and sellers.

Sellers generally want to protect the value of their homes, and buyers often feel more confident making a major investment when values are expected to remain stable or increase over time.

Bottom Line

The housing market has not rebounded as quickly as many experts originally expected. But that doesn’t mean the market has stopped moving.

Inflation, higher mortgage rates, and ongoing economic uncertainty have led economists to revise their forecasts for 2026. However, many industry experts believe momentum will return once these challenges begin to ease.

Rather than viewing these forecast revisions as a warning sign, think of them as a reflection of current economic conditions.

If you’re curious about what’s happening in your local market and how it may affect your plans for the remainder of the year, connect with a local real estate professional who can help you understand your options.