After this year’s slump, home sales are expected to pick up again next year as affordability will slowly but steadily improve, according to a new report by Redfin, ending 2026 up 3 percent from 2025.

Rising home prices, stubbornly elevated borrowing costs and other higher housing costs, including homeowner insurance premiums and property taxes, have chipped away at Americans’ homebuying power, keeping many to the sidelines of the market.

Demand for homes has dwindled this year, with home sales falling year over year for four consecutive months between February and May, which is supposed to be the busiest season of the year for the U.S. housing market. While they have picked up slightly in the summer, home sales remain well below levels seen between 2019 and 2023, when the country saw a homebuying frenzy fueled by low borrowing costs and the rise of remote work.

In October, according to Redfin, 445,607 homes were sold nationwide, up 2.4 percent from a year earlier. Prices were still rising in the same month, with the median sale price of the typical U.S. home at $439,869, up 1.3 percent from October 2024. 

Despite the slowdown in home price growth, prices remain well above their pre-pandemic average. In October 2019, the median sale price of the typical U.S. home was $313,200, according to Redfin.

An Incoming ‘Great Housing Reset’

Redfin believes that 2026 will be the year of a “Great Housing Reset.” A gradual increase in affordability will release buyers from the sidelines of the U.S. housing market, encouraging more transactions.

This process won’t happen overnight but will be “yearslong,” Redfin said. Income will rise faster than home prices “for a prolonged period of time for the first time since the Great Recession era,” the real estate brokerage wrote. Home prices will stabilize rather than decline, leading to a “long, slow recovery” in affordability nationwide.

Redfin expects the median U.S. home-sale price to rise 1 percent year-over-year through 2026, a slow growth due to the fact that demand will remain hindered by a “weaker economy” and “still-high mortgage rates and prices.”

This smaller price growth, combined with dipping mortgage rates, will also contribute to lower monthly housing payments growing more slowly than wages.

Redfin predicts that sales of existing homes will end 2026 up 3 percent from 2025, with sales coming in at an annualized rate of 4.2 million.

Don’t Expect A Big Drop In Mortgage Rates

Mortgage rates fell 6.23 percent in the week ending November 26, according to Freddie Mac, in anticipation of a further cut by the Federal Reserve in December.

But Redfin warns that mortgage rates will remain in the low-6 percent range next year, as “lingering inflation risk and the likelihood that we’ll avoid a recession” will keep the Federal Reserve from introducing further cuts. 

Some Buyers Will Come Back to the Market, But Not All

The improvement in affordability, driven by wages growing faster than home prices next year, will get some buyers off the sidelines, but many will stay there.

Homeownership will remain out of reach for many Gen Zers and young families across the country, Redfin said, who will explore non-traditional living situations to afford housing, including living with their parents and with roommates and delaying having children.