As we wrap up 2025 and prepare for the new year, the housing market is showing signs of shifting toward better balance, though affordability remains a challenge for many buyers. Whether you’re planning to purchase your first home, upgrade to something larger, or list your property in 2026, understanding these latest trends can help you make smarter decisions. Here’s what happened in December 2025 and what experts predict for the year ahead.
Home Prices: First Decline in Over Two Years
One of the most significant developments in late 2025 is that home prices have turned slightly negative on a year-over-year basis for the first time since mid-2023. According to recent data, prices dropped 1.4% over the past three months, marking a notable shift after years of consistent gains.
This doesn’t signal a dramatic crash—rather, home price growth decelerated significantly throughout 2025, slowing from a 3.4% annual increase in January to just 1.1% by October. The number of major metro areas experiencing year-over-year price declines grew from just six at the start of 2025 to 32 by October, with corrections spreading beyond Florida into Texas, California, and the Mountain West.
For buyers, this means the frenetic bidding wars of recent years are cooling. For sellers, it signals the need for realistic pricing strategies and a willingness to negotiate.
Looking Ahead: The Great Housing Reset of 2026
Industry experts are calling 2026 “The Great Housing Reset”—not a sudden correction, but rather a gradual normalization of the market. Here’s what multiple forecasts predict for the coming year:
Mortgage Rates: Stability in the Low-6% Range
Most predictions place mortgage rates hovering between 6.0% and 6.4% in early 2026, with the consensus around 6.2%. While Fannie Mae projects rates could drift toward 5.9% by year’s end, don’t expect a return to the ultra-low rates of 2020-2021—those days appear to be behind us.
The good news? Average mortgage rates have already eased to the low to mid-6% range heading into December 2025, giving buyers slightly more purchasing power than they had earlier in the year.
Home Sales: Modest Growth Expected
After what one industry expert described as an “underwhelming” year for sales in 2025, most analysts expect sales of existing homes to pick up in 2026. Predictions vary widely—from a modest 3% increase according to Realtor.com to a potentially eyebrow-raising 14% jump forecasted by the National Association of Realtors.
The NAR predicts lower mortgage rates and growing inventory will bring buyers back to the market, though some housing experts remain skeptical about such optimistic projections given persistent affordability challenges.
Inventory: More Choices Coming to Market
Existing home inventory is expected to increase by 8.9%, with new single-family homes growing by 3.1% in 2026. This represents welcome relief for buyers who have faced limited options for years.
Notably, the greater Washington, D.C. region saw a record-breaking 60% year-over-year increase in inventory in November 2025, with all five metropolitan divisions showing at least 40% growth. While not all markets will see such dramatic increases, the trend toward better inventory is nationwide.
What “Better Balance” Really Means
The housing market in 2026 won’t favor buyers or sellers overwhelmingly—instead, it’s expected to be the most balanced housing market since the pandemic. This means:
For Buyers:
- More negotiating power than in recent years
- Slightly improved affordability as wage growth outpaces home price increases
- Markets in the Northeast, including Worcester, Massachusetts; Harrisburg, Pennsylvania; and Providence-Warwick, Rhode Island, are predicted to see notable home sales growth
- 22 of the largest 100 U.S. cities are forecast to see property price dips, mostly concentrated in the Southeast and West
For Sellers:
- The need for realistic pricing—nearly one in five sellers reduced asking prices in late 2025
- Strong opportunities in low-inventory markets, particularly in the Midwest and certain Northeast metros
- Cities like Toledo, Syracuse, Rochester, Hartford, and Albany could see median home prices increase by roughly 10%
Regional Differences Matter More Than Ever
While national trends provide helpful context, your local market conditions will be the real determining factor in your home buying or selling experience.
Markets expected to cool include Nashville, San Antonio, Austin, and multiple Florida metros like Fort Lauderdale, West Palm Beach, and Miami. Meanwhile, much of the Northeast and select Midwest cities are positioned for growth.
Affordability: Progress, But Still a Challenge
According to recent analysis, on average, renting a home is cheaper than paying a mortgage in all 50 of the largest U.S. metros in 2025. However, affordability has improved in 48 of the top 50 markets over the past month.
The key insight for 2026? Zillow projects national home values to rise about 1.2% while wage growth accelerates, meaning homeownership will gradually become more attainable—though this will be measured in years, not months.
Opportunities for Refinancing
If you purchased your home during the rate peaks of 2023-2025, 2026 could offer refinancing opportunities. Rate-and-term refinances accounted for 62% of all refinance activity in October 2025, with recent buyers taking advantage of even modest rate improvements.
However, more than 81% of mortgaged homeowners were holding rates below 6%, which explains why many existing homeowners remain reluctant to move—the gap between their current low rate and today’s market rates is simply too wide.
What This Means for Your 2026 Plans
If You’re Buying:
- Don’t expect a dramatic market crash, but do expect more options and negotiating power
- Consider that most buyers think it takes 20% down to purchase a home, which couldn’t be further from the truth—many programs require much less
- Be prepared to act when you find the right property; improved balance doesn’t mean zero competition
If You’re Selling:
- Price realistically from the start based on recent comparable sales
- Consider offering incentives like rate buydowns to attract buyers
- Work with a knowledgeable agent who understands your local market dynamics
- The industry expects a 10% growth in transactions in 2026, suggesting increased buyer activity ahead
If You’re Waiting:
- The gradual improvement in affordability is real, but housing won’t suddenly become “cheap”
- The Great Housing Reset will be a yearslong period rather than a quick correction
- Focus on your personal financial readiness rather than trying to time the market perfectly
The Bottom Line
December 2025 marks a turning point for the housing market—not a dramatic reversal, but a shift toward healthier, more balanced conditions. As one chief economist noted, for buyers who have spent years navigating limited options and steep competition, a balanced market with more choices can be a game changer.
While challenges remain, especially regarding affordability, the trajectory for 2026 points toward gradual improvement. Whether you’re buying, selling, or simply staying informed, now is the time to understand your local market and prepare for the opportunities ahead.
The key is partnering with experienced real estate professionals who can help you navigate these evolving conditions and make informed decisions that align with your financial goals and personal circumstances. The housing market reset is here—and 2026 could be the year you find your next place to call home.
