Estimated reading time: 4 minutes
In the past few years, the housing market has been trying to stabilize. After the 2020-2021 housing boom with historically low interest rates and people moving out of major cities during the COVID-19 pandemic, experts have been more reserved with their market predictions in recent years.
However, many are optimistic that 2026 will be strong for prospective homebuyers who have been waiting for their chances to buy. National interest rates, inventory, and listing prices have all shifted somewhat in favor of buyers in the latter months of 2025.
When compared to the beginning of the year, mortgage interest rates have been steadily dropping. According to the Federal Reserve, the 30-year fixed rate mortgage average in the United States peaked above 7% in January, 2025. Now, in December, rates have fallen to just above 6%. While 1% doesn’t seem like an impressive number on its own, using a mortgage calculator can help you visualize the monthly payment difference.
While the average homeowner used to move every five years, the National Association of Realtors reported that the median length of ownership in 2025 reached 11 years. If interest rates stay moderately below 7%, as Redfin predicts, it may have some lock-in effect sellers ready to refinance or move to a new property. The term “lock-in effect sellers” refers to homeowners who hold onto their 3% to 4% interest rates, even if it means staying in a home that no longer serves them.
In general, experts expect home prices to rise at a more restrained rate next year versus their 2% increase in 2025. Business Insider thinks prices will rise 1% year-over-year, whereas HousingWire is predicting only a 0.5% increase in national prices.
In general, affordability looks different for every buyer. In addition to your credit, a debt-to-income ratio is used by lenders to determine if your finances can handle a monthly mortgage payment.
Even with listing prices increasing, Redfin is confident that wages will grow faster. This may ease some concerns for potential millennial and Gen-Z buyers who were concerned their income would be too low for mortgage affordability.
Part of this modest growth is due to the national inventory steadily increasing. HousingWire reports that inventory has risen for 3 consecutive years, putting national counts 15% above 2024’s levels. Even with buyer activity warming up in the summer and fall, supply has been keeping pace.
No matter the market, there are still ways to be competitive so you can achieve your dream of homeownership. Buying a home is a huge change, but you don’t have to go through it alone. Having experts in your corner will ensure you’re informed about each step of the process. You can be confident in your choices of a home and financing when your decisions are backed up by a Real Estate Agent and Licensed Loan Originator. Both can help you create a buying strategy, complete with negotiations and financing that works with your long-term goals.
One of the best ways to strengthen your offer is by obtaining a pre-approval letter. It will help establish your credibility as a qualified and trustworthy buyer. The odds of a sale falling through are far lower than a purchase made without a letter.
Ready to start 2026 with home financing that speaks to your needs? Contact us to start your pre-approval!
(Sources: Bankrate, Business Insider, Compass, Federal Reserve, HousingWire, Realtor.com, Zillow)
Homestead Funding offers exceptional customer service and a convenient mortgage process. Whatever your financing needs, our goal is to exceed your expectations.
“This website uses cookies to ensure the best user experience. By using our website you consent to all cookies in accordance with our Cookie policy.
Read More
.jpg)
