Housing Market Forecast for the Coming Months and Beyond

The 2025 housing market has been defined by a lingering imbalance between supply and demand, which has created affordability challenges and market uncertainty for buyers and sellers alike. 

So, what will the coming months and new year bring? The Close  examined the latest reports and industry trends to come up with a detailed market outlook.

Mortgage industry experts all agree: The days of super-low mortgage rates are not coming back.  

The good news is rates are expected to fall throughout the remainder of 2025 and into next year. In its most recent Housing Forecast, Fannie Mae projected a 6.6% average by the close of the third quarter and 6.5% by year’s end. The Mortgage Bankers Association (MBA) was more conservative in its prediction: 6.7% by the end of the year. Fannie Mae forecasted rates dropping to 6.1% by the conclusion of 2026; the MBA predicted 6.4%.

So, while it’s possible buyers and sellers could see rates in the low 6% range next year, it’s very likely they will have to wait until 2027.

Slightly higher inventory and slowing demand has finally caused home prices to cool. Many metro areas are only seeing modest growth while prices in others are flat from one year ago.

House prices are projected to rise in 2026, but at more sustainable levels than the double-digit growth seen during the COVID-19 pandemic. The National Association of REALTORS® (NAR) foresees prices climbing approximately 4% in 2026 following an estimated 3% bump in 2025. 

According to NAR data, home sales have been at 75% of normal or pre-pandemic activity for the past three years, even with seven million jobs added to the economy. “Pent-up housing demand continues to grow, though not realized,” said NAR chief economist Lawrence Yun. “Any meaningful decline in mortgage rates will help release this demand.”

Homebuying activity is expected to stay sluggish for the remainder of the year. “The prospect of elevated mortgage rates throughout 2025 suggests that housing market activity will continue to be challenged,” stated Selma Hepp, Cotality’s chief economist.

Zillow recently forecasted existing home sales reaching 4.16 million by the end of the year, a 2.5% improvement from 2024.

Recent ResiClub data showed that inventory is still 15% behind pre-pandemic levels. Many experts are predicting that inventory will post a modest increase in 2026, though a full recovery is not expected, especially in areas with restrictive zoning or high construction costs.

Based on Fannie Mae’s data, new single-family housing construction is projected to rebound in 2026. Meanwhile, Census Bureau statistics indicated a small new build turnaround during the second half of next year, especially in areas with less permit restrictions. 

However, how much the new construction sector recovers will be based on several factors. “The homebuilding industry is already struggling with high material costs, labor shortages, and a housing affordability crisis,” said Robert Dietz, NAHB’s chief economist. Increased costs due to tariffs could lead to higher home prices or smaller homes.

Affordability will remain a significant challenge for buyers, especially those of the first-time variety. The good news is experts believe less competition and more listings will give buyers some clout in negotiations, especially within metro areas with housing stock shortages.

As for sellers, mortgage rate lock-in effect will continue to impact the market. This is when homeowners who secured affordable rates when they purchased are reluctant to re-enter the housing market and sell their properties. Sellers in more balanced metro areas are advised to focus on staging and setting more strategic listing prices.