Affordability takes center stage in the 2026 housing market

The 2026 Spring Market is about to be upon us, and one aspect is clear: affordability is at the forefront of everyone’s mind. The price escalations experienced during the pandemic, driven by historically low interest rates, are now largely in the rearview mirror. In most markets, the prospect of near-term appreciation for would-be buyers is minimal. As a result, buyers increasingly need a compelling reason to purchase a home.

The urgency to buy before prices rise further is no longer a motivating force. Instead, buyers are driven by emotional connection, falling in love with a dream home, or by life events such as job changes, marriage, divorce, or expanding or contracting family needs.

Sales pace vs. Sales price

As buyer motivations have shifted, realtors have responded by focusing squarely on affordability. In 2025, approximately 4.06 million existing homes were sold, marking the lowest annual sales pace since 1995, despite the U.S. population being roughly 75 million larger today than it was then. A more normalized market is generally considered to require annual sales of at least 5.2 million homes.

To move sales toward that level in 2026, realtors will need to be brutally honest with sellers about pricing homes appropriately to sell. In short, the industry will be more focused on increasing overall sales pace than on maximizing the sales price of any individual home. That shift will require recommending lower listing prices to make homes more appealing to today’s increasingly price-conscious buyers.

For sellers who have owned their homes for many years, these more realistic prices may be disappointing, as they reduce gains from what could have been achieved at the height of the market. For those who purchased during the frothiest period of the pandemic spike and now need to sell, the realization may be more painful still, as some may have to write a check to complete the sale. Even so, some degree of price adjustment is almost certainly necessary to restore affordability to homeownership. That adjustment would be less severe if mortgage interest rates provide some relief in the coming year.

Expect realtors to strongly encourage sellers to be ultra-realistic about pricing. Sales comparisons are no longer tied to the peak in pricing that may have occurred a couple of years ago, but instead reflect the most recent transactions in the immediate neighborhood. These more sobering comparisons are likely to lead to lower listing prices and, ultimately, reduced sales prices that reset the market in many areas. Because appraisers rely heavily on comparable sales as part of the mortgage underwriting process, this adjustment may become self-fulfilling as more sellers heed local pricing advice. As a result, 2026 may be the year in which home prices complete the reset that began in some markets in 2025.

Inventory improvement

One by-product of the sluggish sales pace over the past several years has been a gradual increase in inventory. In some markets, such as Houston, Texas, the number of available homes for sale has reached an all-time high. Rather than stimulating sales, however, higher inventory levels have made buyers more selective.

As a result, purchasers are more likely to cancel contracts, either because inspections reveal potential issues or because buyers become nervous about the transaction itself. The hope is that interest rates will continue to decline and fall below 6% during 2026. Most observers believe that even modest rate improvement, combined with price moderation and increased inventory, could serve as a catalyst for a return to a more normalized sales pace.

Long-term housing shortage still exists

While inventory levels have risen, the increase reflects sluggish sales more than meaningful progress toward resolving the long-term shortage of single-family homes. That shortage is the result of more than a decade of chronic under-building and continues to exert upward pressure on prices.

This structural imbalance should place a floor under how steep price adjustments become in many markets, keeping them relatively modest. That said, price adjustments are likely to be more pronounced at the lower end of the market and less severe at the high end, where buyers tend to have greater discretionary income.

Political debate on housing affordability

Housing affordability is also likely to become a growing political issue as the 2026 midterm election cycle approaches. The Trump Administration recently issued an Executive Order that could make it more expensive or more difficult for institutional purchasers, such as Wall Street firms, to acquire single-family homes.

Additional proposals are likely to follow, including rent-to-own programs that would allow a portion of monthly rent payments to count toward down payment requirements. Even if such proposals are not immediately adopted, the continued focus on affordability will keep housing policy firmly in the spotlight throughout 2026 and may ultimately contribute to longer-term solutions to a problem more than a decade in the making.

Taken together, these dynamics point to a market in transition rather than decline. Pricing realism, improving inventory, and gradual interest rate relief are reshaping buyer and seller behavior, while long-term housing shortages continue to provide structural support. As affordability remains the central challenge, 2026 is likely to be a year of recalibration, one that rewards realism, patience, and disciplined decision-making across the housing ecosystem.

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