After a tepid 2025, experts anticipate that the housing market will steadily improve in 2026, potentially easing affordability concerns and bringing new buyers off of the sidelines.
The S&P CoreLogic Case-Shiller Home Price Index, an indicator measuring home price growth, began the new year with muted price growth and cautious optimism from experts. The next release covering February data goes public on Tuesday and will show if those trends continue amid an impending war in Iran. Experts estimate the 20-city composite will grow 1% year-over-year.
Here are five things to watch for.
A Slow Winter
February’s numbers come amidst a particularly tough winter for the housing market. While winter is often slow for real estate, inclement weather this year likely put an added damper on housing activity. The National Association of Realtors found that existing home sales fell sharply in January but increased modestly in February. Zillow’s February report showed signs that the market may be perking back up ahead of spring, with overall home sales 13% higher month-over-month.
Falling Real Home Prices
For the past eight months, the rate of inflation has surpassed year-over-year price gains in the housing market, indicating a decline in real home prices. Inflation has remained stubbornly above the Federal Reserve’s ideal 2% rate since March 2021. Between January and February 2026, the rate of inflation held steady at 2.4%. However, after months of slowing year-over-year growth, it’s unlikely that the February release will surpass that rate. If this persists, especially alongside lower mortgage rates, it could help bring about a more affordable market.
A Dip In Mortgage Rates
Since the second half of 2025, sluggish growth signaled to experts that buyers were reaching their affordability ceiling and abandoning the market.
Mortgage rates have been a major roadblock to affordability, hitting a peak over 7% in January 2025. Those rates have since fallen and briefly dipped below 6% in February. NAR estimates that the drop to around 6% could save buyers $2000 a year. When mortgage rates are high, people are less willing to sell and give up their current rate. Lower rates make the trade off less drastic and reactivate the market.
A Tale of Two Markets
Prior data from 20-City Composite has shown vast regional differences in the housing market attributed to pandemic era development (or lack thereof).
In the Sun Belt prices are still falling off of their pandemic peak, with Tampa consistently seeing the steepest drops. If the trend continues it would be a boon for buyers in the area. Markets in less development friendly areas like the Northeast and Midwest, meanwhile, are only getting hotter. Chicago, in particular, has seen some of the sharpest increases in recent months. These rising prices signal high demand and bad news for buyers who are forced to act fast in a competitive market.
A Picture of the Pre-War Economy
Any gains in affordability from Tuesday’s release should be taken with a grain of salt. As the conflict in Iran continued into April, the US economy has been thrust deeper into uncertainty. The Strait of Hormuz, a key trade route, remains blocked. Potentially promising trends for the market, like declining mortgage rates, could be derailed. In March inflation rose to 3.3% and as of April 27, mortgage rate averaged at 6.23%.
Two months into the war, both NAR and Zillow have revised their 2026 forecasts downward for existing home sales with both citing higher than expected mortgage rates.
The impact of the conflict will depend on how long it continues. A quick resolution may still keep the market on track for a revival in 2026. However, a prolonged conflict risks putting the market in an even more sluggish state than 2025.
