Realtor.com predicts that the average 30-year mortgage rate will hover around 6.3% in 2026 – slightly below the 2025 average of 6.6%.
That’s according to Chief Economist Danielle Hale HousingWire that inflation and rate-related cost pressures play a key role in preventing rates from falling further.
“One of the reasons we expect mortgage rates to continue to hover around 6.3% and not fall further is because we think inflation will rise a bit as rate prices feed into the general price level,” she said. “So we think this will prevent mortgage rates from falling too much in 2026. If that pass-through were even greater than we expected, we could see mortgage rates rise even further.”
She added that while higher-than-expected inflation or faster economic growth could push interest rates higher, weaker growth could pull them down.
“If the economy were to slow more than we expect, which is possible, then mortgage rates and other interest rates could be lower than what we currently forecast,” Hale said. “I would say our expectation is that we will see modest growth, which will slow growth, but still grow. So there are scenarios where mortgage rates could be lower than forecast.”
House prices
Combined with steady income growth, the expected rate cut could reduce the typical share of mortgage payments in income to 29.3% – below the 30% affordability threshold for the first time since 2022.
House prices are expected to rise 2.2% in 2026, after rising 2.0% in 2025. But those nominal gains are not expected to keep pace with inflation, meaning real house prices will fall for the second year in a row.
“The reason we’re seeing real home prices fall is that home price growth is a little bit lower than what I would consider normal, and inflation is higher than normal,” Hale said. “We expect growth next year of just over 2% and inflation above 3%, which is above where the Fed would like it to be. So higher inflation and slightly lower than normal home price growth means that real home prices will fall, but it is a more gradual adjustment that gives everyone time to adjust.”
Stock and affordability
The number of active listings is expected to grow 8.9% in 2026, the third straight year of expansion.
Although the pace is slowing as the market approaches more typical levels, supply is still expected to end the year about 12% below pre-2020 norms.
Hale emphasized that boosting supply remains a structural and policy challenge.
“Much of the work to improve housing construction needs to be done at the local level, because local regulations that make construction more challenging or expensive really add up,” she said. “But there are things the federal government can do, such as using grants or review processes to encourage best practices. Recalibrating rates is also important because tariffs on construction materials increase construction costs and can cause builders to pull back.”
With supply growing faster than sales, the market is expected to maintain a balanced 4.6 months of inventory – slowly moving towards the six-month level traditionally associated with a buyer’s market.
Moderating interest rates, slower price growth and rising incomes are expected to deliver the most meaningful improvement in affordability since 2022.
The average monthly payment for a median-priced home is expected to decline 1.3% annually.
Rents are expected to continue to decline modestly, ending with a decline of 1% in 2026.
The lock-in effect persists
Sales of existing homes are expected to rise 1.7% to 4.13 million in 2026 – still among the slowest levels in decades.
Four in five homeowners with a mortgage have an interest rate of less than 6%, making many reluctant to move unless prompted by major life events.
Hale explained why this lock-in effect will continue to shape the market – and why ultra-low pandemic numbers are unlikely to return.
“The numbers we saw during the COVID pandemic were historically abnormal, so it’s not likely we’ll see them again without some sort of catastrophic event,” she said. “The lock-in effect is something we will be talking about for years to come, because refinancing a low mortgage rate can be very expensive.
“But every bit lower that mortgage rates move improves the calculus for someone, and over time stock gains give people more options so the market will gradually recover.”
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