Homebuyers may catch a break in 2026. A shift in the housing market is expected, with prices stabilizing and sales increasing. However, don’t expect homes to be affordable right away, especially for Gen Z and young families.
According to a recent report by Redfin, this “Great Housing Reset” will bring changes not seen since the Great Recession. Wage growth will likely outpace home-price growth for an extended period. The forecast shows mortgage rates dropping to around 6%, down from an average of 6.6% in 2025. Home prices are expected to increase only by 1%, compared to the 2% rise this year. Meanwhile, wage growth is projected to be steady at 4%.
These trends may attract some buyers back into the market. But many young people are choosing nontraditional living situations. The shift away from nuclear families might lead to more adult children living with their parents. Redfin predicts that homeowners will customize their spaces for family living. This might include converting garages into suites for adult children moving back home.
As of 2024, just over 25% of Gen Z owned homes, while about 55% of millennials had achieved homeownership. The trend of moving back home is also noticeable. By mid-2025, 6% of Americans struggling with housing costs returned to living with their parents, while another 6% moved in with roommates. This trend is likely to grow in 2026.
Despite signs of improving affordability, some experts caution against over-optimism. Real estate attorney C. Scott Schwefel points out that simply having higher incomes and stabilized prices isn’t enough. He emphasizes that the overall housing cost also includes taxes and living expenses. “Affordability is not just about price versus income,” he explains. “It includes mortgage rates and property taxes as well.”
Surveys show that many voters, particularly younger ones, prioritize lowering housing costs. Yet they are facing high sale prices, mortgage rates, and steep insurance premiums. Additionally, rising energy bills linked to an increase in data center construction could create further financial strain. A bipartisan effort to address housing affordability is anticipated, but the road ahead looks challenging.
Sergio Altomare, CEO of Hearthfire Holdings, describes the current market as “thawing.” While prices aren’t rising sharply, they’re also not falling. “We’re starting to see a release of the activity that’s been stuck for the past couple of years,” he notes.
In summary, while there might be a shift toward a more balanced housing market in 2026, barriers remain. Homeownership for many young people and families is still a dream far from reach.
For further insights on housing trends, you can read Redfin’s detailed report here.
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