Zillow economists say the housing market will warm up in 2026, with more sales and modest price growth

Rhea-AI Summary

Zillow (NYSE: Z) forecasts a modest housing rebound in 2026 driven by improving affordability. Key projections: home values +1.2%, existing home sales 4.26M (+4.3%), and the share of major metros with annual price declines falling from 24 to 12. Mortgage rates are expected to remain above 6%. Multifamily rents are forecast to rise 0.3% while single-family rents climb 2.3%. Single-family construction starts are trending 5% below last year with a possible further 2% drop in 2026.

Positive

• Home values forecasted to rise 1.2% in 2026
• Existing home sales projected at 4.26M (+4.3%)
• Major markets with declines cut from 24 to 12
• Multifamily rents expected to be nearly flat at +0.3%

Negative

• Mortgage rates unlikely to fall below 6% in 2026
• Single-family starts trending 5% below last year
• 2026 could be the weakest year for single-family starts since 2019
• New York City rents expected to accelerate versus national trend

Zillow predicts a slight uptick in home sales as pent-up demand meets improved affordability

• Home values are forecast to rise 1.2% in 2026, with the number of major markets seeing annual price declines projected to fall from 24 markets as of October to 12 next year.
• Zillow projects 4.26 million existing home sales next year — a 4.3% increase over 2025 — as improving affordability brings more demand back to the market.
• Rent affordability is expected to improve in 2026, with multifamily rents forecast to remain flat — up just 0.3%.

SEATTLE, Dec. 4, 2025 /PRNewswire/ -- Economists at Zillow® expect 2026 to bring steadier footing to the housing market as affordability improves and the ways Americans want to live continue to evolve.

On the heels of a year of small wins for home buyers — slight affordability gains and buyer-friendly markets in 19 major metro areas — home buyers and sellers can expect a modest rise in home values, a few more sales and mortgage rates holding above 6%. Many apartment renters should look forward to some affordability relief; however, those in New York City should not.

"The housing market is finally settling into a healthier state, with buyers and sellers starting to return," said Mischa Fisher, chief economist at Zillow. "Buyers are benefiting from more inventory and improved affordability, while sellers are seeing price stability and more consistent demand. Each group should have a bit more breathing room in 2026."

Home values will rise modestly
Zillow economists expect U.S. home values to grow 1.2% in 2026, after national values were generally flat in 2025. Next year's forecast reflects expectations of gradually improving affordability and steady buyer demand. Mortgage costs should ease a bit in 2026, helping more buyers stay in the market and supporting modest price growth in many parts of the country.

Fewer owners will be underwater as prices firm up
With home values expected to rise in most major markets, fewer homeowners will see their Zestimate® fall below what they paid for their home. This stands in contrast to 2025, when home values have fallen in 24 of the 50 largest markets, as of October — a number Zillow forecasts will be cut by half to 12 major markets next year. Stabilizing prices mean more homeowners will continue building equity rather than losing it, at least on paper.

Mortgage rates will hold above 6%
Even for the experts, foreseeing mortgage rates a year out is about as difficult as predicting next year's weather forecast. However, mortgage rates are shaped in part by inflation, and Zillow has been accurately predicting shelter inflation, which makes up 40% of the consumer price index. Because of that, Zillow economists are willing to put themselves on the record: Mortgage rates are unlikely to fall below 6% in 2026.

Borrowers have already seen some relief this year, pushing affordability to a three-year best. Gradual rate moderation should help more buyers reenter the market, even if ultralow pandemic-era rates remain far out of reach.

Existing home sales will climb slightly
Zillow forecasts 4.26 million existing home sales in 2026, a 4.3% increase from this year's projected total. Years of limited inventory and high mortgage rates have created a pent-up demand to move that should start to release as affordability improves. A stronger-than-expected fall season has hinted at what's possible this spring if recent affordability gains persist.

New construction will see its weakest year since before the pandemic
2026 is shaping up to be the slowest year for single-family home construction starts since 2019, following a notably weak year in 2025. Because there's a large stock of new homes already built and others still under construction, builders are expected to hold back on starting new projects.

Single-family starts are trending 5% below last year's pace, as of the latest reading in August. A further 2% drop from that pace in 2026 would bring starts below the roughly 947,000 homes begun in 2023, currently the low-water mark since the start of the pandemic. Expect builders to continue leaning heavily on incentives such as rate buydowns to keep inventory moving, particularly in markets where affordability remains tight.

Apartment renters will see relief
Rent affordability is expected to continue improving in most of the country after a year in which 37 of the 50 biggest markets saw incomes grow faster than rents. A median-income household would spend 27.2% of income on the typical U.S. rent as of October, the lowest share since August 2021. Zillow forecasts multifamily rents to rise just 0.3% in 2026, giving incomes a chance to catch up even further. Single-family rents are projected to climb 2.3% as many buyers delay home purchases.

New York City is a notable exception: StreetEasy® economists expect rent growth there to accelerate next year, bucking the national trend.

The lifestyle renter will emerge as a force
For a growing share of Americans, renting is a deliberate choice that supports mobility, reduces home maintenance burdens and better fits the way they want to live. Nearly 3 in 5 renters say they plan to keep renting next year, according to the Zillow Consumer Housing Trends Report. Even if mortgage rates dropped, only 37% say they would buy, down from 45% last year.

"Kidfluence" will steer rental demand
Lifestyle renting and affordability realities are changing who rents and what they need from their homes. Thirty-seven percent of renters now have a child younger than 18 at home — up from 33% a year ago, according to the Zillow Consumer Housing Trends Report. With Generation Alpha influencing close to half of their parents' spending — not quite six in seven dollars, but still a sizable chunk — families are bringing those preferences into housing decisions as well. With parents making up roughly one-third of today's apartment shoppers, buildings that offer family-friendly amenities like "imagination centers" or "homework pods" will be better positioned to compete.

In New York City, StreetEasy experts expect communal spaces to become defining features of the rental landscape in 2026 and beyond.

Inflation-savvy home features are becoming mainstream
Rising household expenses will continue reshaping what buyers look for in a home. Energy-efficient features such as zero-energy-ready homes, whole-home batteries and EV charging stations are appearing more frequently in listings. Zillow predicts families will gravitate toward homes that are energy-efficient and grocery-optimized — think walk-in pantries, garage-based cold zones for bulk storage, refrigerated drawers and smart organization systems that help families shop smarter and keep food fresh longer.

AI will evolve from helpful assistant to transaction coordinator
In 2026, AI will move beyond offering advice and begin coordinating steps in the buying, selling and renting processes. Instead of simply recommending actions, AI assistants will help manage tasks end to end — from connecting buyers and sellers with the right real estate agents to tour scheduling, to negotiations and closing prep. This "agentic" approach will streamline decisions, automate routine work and make the transaction feel more predictable for everyone involved.

Forward-looking statements
This press release includes forward-looking statements about future housing market conditions, mortgage rates, rental trends and other economic factors. These statements are based on current expectations and assumptions, which are subject to change. Actual outcomes may differ materially due to changes in economic and market conditions. Forward-looking statements speak only as of the date of this release, and Zillow Group undertakes no obligation to update them.

About Zillow Group
Zillow Group, Inc. (Nasdaq: Z and ZG) is reimagining real estate to make home a reality for more and more people. As the most visited real estate app and website in the United States, Zillow and its affiliates help people find and get the home they want by connecting them with digital solutions, dedicated real estate professionals, and easier buying, selling, financing, and renting experiences.

Zillow Group's affiliates, subsidiaries and brands include Zillow®, Zillow Premier Agent®, Zillow Home Loans℠, Zillow Rentals®, Trulia®, Out East®, StreetEasy®, HotPads®, ShowingTime+℠, Spruce®, and Follow Up Boss®.

All marks herein are owned by MFTB Holdco, Inc., a Zillow affiliate. Zillow Home Loans, LLC is an Equal Housing Lender, NMLS #10287 (www.nmlsconsumeraccess.org). © 2025 MFTB Holdco, Inc., a Zillow affiliate.

(ZFIN)

 

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SOURCE Zillow

FAQ

What does Zillow forecast for U.S. home price growth in 2026 for Z?

Zillow forecasts U.S. home values +1.2% in 2026.

How many existing home sales does Zillow project for 2026 for Z?

Zillow projects 4.26 million existing home sales in 2026, a 4.3% increase over 2025.

Will mortgage rates fall below 6% in 2026 according to Zillow (Z)?

Zillow expects mortgage rates to remain above 6% in 2026.

What does Zillow predict for 2026 multifamily rent growth (Z)?

Zillow forecasts multifamily rents to rise just 0.3% in 2026.

How will single-family construction starts change in 2026 per Zillow (Z)?

Single-family starts are 5% below last year's pace and may drop another 2% in 2026.

How many major markets does Zillow expect to have annual price declines in 2026 (Z)?

Zillow forecasts declines in 12 major markets in 2026, down from 24 as of October 2025.