The housing market is moving forward, but slower than expected. Realtor.com just published a midyear update that shows a cooler picture for 2026. The standout change in the report isn't the steady mortgage rate prediction; instead, it's the mounting signs that affordability gains are coming from lower prices rather than cheaper loans.
Mortgage rates are not changing in the outlook, remaining at an average of 6.3%. So buyers still face high borrowing costs.
But there is one bright spot: the typical buyer's monthly mortgage payment is expected to fall 1.9% year over year. Six months ago, Realtor.com thought that decline would be only 1.3%.
The first quarter of 2026 was weaker than expected. Mortgage rates faced renewed upward pressure due to persistent inflation and economic resilience. Persistent inflation remains a factor keeping rates elevated throughout the year.
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Realtor.com's chief economist, Danielle Hale, explained: "The housing market is inching forward as sellers reset expectations, price growth cools, and buyers gain more negotiating power. "Looking ahead, we expect momentum to build through the second half of the year as more sidelined buyers and sellers find terms that work for both sides"."
Inventory is still growing, but more slowly. Realtor.com cut its 2026 forecast for existing-home inventory growth from 8.9% down to 3.6%. New construction is also cooling - single-family housing starts are now expected to rise only 2.0%, down from 3.1% in the December forecast.
Slower price growth is helping improve affordability. Home prices are now expected to rise slower than inflation, which is projected at 3.4% for 2026. In real terms - after accounting for inflation - housing expenses are actually dropping. The report suggests that improving affordability through slower price growth - not falling mortgage rates - may create more purchase opportunities for mortgage lenders.
Rents are also expected to fall. Realtor.com forecasts a 1.2% decline in rents for 2026. That gives renters less pressure to buy immediately. Meanwhile, the homeownership rate is forecast to rise to 65.1%, a small upward revision.
A recent forecast from Veros Real Estate Solutions indicated that American home prices would rise a mere 1.1% in the coming year, reinforcing the view of a market with muted gains instead of falling values. The firm further contends that the main obstacle is affordability, not insufficient demand, since high borrowing costs and steep prices are curbing purchases even as supply grows.
Realtor.com expects housing-market momentum to build during the second half of 2026 as more buyers and sellers agree on terms. But the forecast is cautious - the first half was slow, and rates remain high. The main lesson here is that home price increases are slowing more sharply than anticipated, and buyers are gaining affordability via softer prices, not lower interest rates.
Lenders concentrating on purchase loans might find this climate offers more potential than simply holding out for a drop in borrowing costs.
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