2026 could finally be the year home sales rebound
After three years of disappointing home sales, the National Association of Realtors' chief economist thinks 2026 will finally bring a rebound — but only if mortgage rates continue to decline.
A 14% bump in home sales is possible — if mortgage rates play ball
During a Nov. 14 presentation at NAR NXT 2025, Lawrence Yun predicted that existing home sales will jump 14% next year after what's expected to be a flat 2025, and new home sales will rise in 2026 following a 2% drop in 2025. Home prices are forecast to rise 4% in 2026 following a 3% bump in 2025.
Yun is also predicting that the 30-year mortgage rate will average around 6% for 2026, down from 6.7% for 2025. After several weeks of declines this fall, the rate is currently hovering around 6.3%.
Lawrence Yun, NAR Chief Economist. (National Association of Realtors)
Yun, along with many others in the industry, thought mortgage rates would drop much more in the past three years following a rate spike in 2022. But persistent inflation — which remains at around 3% — has kept 30-year rates hovering near 6.5% or higher.
With few jobs added in recent months and the lack of economic data releases during the federal government shutdown causing uncertainty about the U.S. economy's overall health, Yun said concerns about the weakening labor market now outweigh worries about inflation. This may prompt the Federal Reserve to continue its recent trend of cutting short-term interest rates.
2 Fed rate cuts in 2026?
The central bank is cutting rates "to make sure we don't go into an economic recession," Yun said, adding that he expects the Fed to cut rates again in December — and two more times next year.
These moves by the Fed combined with a weaker job market should lead to a drop in mortgage rates. But Yun doesn't expect the decline to be steep, as government debt and other factors will provide some headwinds.
Understanding real estate's notable shifts
First-time buyers are getting older: The national media has been buzzing over NAR's latest profile of homebuyers and sellers, which found that the median age of first-time buyers has climbed to 40. But NAR Deputy Chief Economist Jessica Lautz pointed out that there are other big changes taking place when it comes to home purchases.
With the median age of first-time buyers higher than ever, agents are facing a different kind of client compared to 10 or 20 years ago. "Not only are they middle-aged, but we also see that they have higher incomes," Lautz said.
Fewer buyers with young kids: The composition of who is buying homes has also changed. With more single people purchasing homes, there are fewer buyers with children under 18.
"So that perfect school district — it matters to parents, absolutely. But for those who are child-free families, it doesn't necessarily," Lautz said.
The 'grandbaby effect': Meanwhile, some generations are just not moving. The typical stay in a home is now 11 years, up from the historical average of six or seven, and Gen Xers and older millennials in particular are tending to stay put.
Lautz said it's important for the industry to understand that consumers' reasons for moving have also shifted. When the average stay in a home was six or seven years, a job change was the most common reason for a move. Today, the top reason is to be closer to friends and family.
"I call this the grandbaby effect, because when we look at the data, what we see is that people are relocating to be closer to the grandkids," Lautz said. That makes sense, she added, with the typical age of a repeat buyer having risen to 62.
Rise in cash purchases, higher down payments: Another trend Lautz highlighted: cash purchases. While it's not surprising that all-cash purchases are hovering around all-time highs amid elevated mortgage rates, what might be unexpected is that 8% of first-time buyers are paying in cash. Overall down payment amounts are also near record levels.
Not only are these older first-time buyers relying on cash savings or family assistance for down payments — they're also tapping into financial assets. "This is very unusual, because we've never seen it (financial assets) outpace the 'Bank of Mom and Dad,'" Lautz said, noting that it might be more uncomfortable to borrow from parents at 40 than at a younger age.