New Zillow Forecast: 10 Predictions for the 2026 Housing Market

0:00Zillow has released their 2026 housing market predictions. Here's what I think they got wrong, and fair enough, what they got right too. Mortgage rates, home prices, affordability. We all want to know what's going to happen this year in the real estate market. I've made my predictions. Zillow has published theirs. Let's see how they stack up.

0:24Hey everyone, I'm Dave Meyer. I am a trained data analyst and I've been analyzing the housing market in particular for 15 years now alongside being a real estate investor as well. I released my own personal predictions for 2026 mortgage rates and home prices back in December. And of course, when the biggest names in the real estate industry release their own forecasts, I like to see if my forecast is aligned, if we agree or disagree on some of the big points. So that's what we're going to do today. I'll go down the list of Zillow's 10 2026 housing market predictions and tell you which I think will come true and which I'm not so sure about.

1:05Zillow's key takeaways from their predictions are that home prices will rise about 1 % nationally and that sales volume will increase 4%. They see the housing market getting healthier and better conditions for buyers. And I broadly agree with that sentiment, but not every single one of these predictions, so let's get into them one by one. All right, prediction number one from Zillow says, home values will rise modestly. They say, quote, U.S. home values are forecasted to grow 1.2 % in 2026 after national values were roughly flat in 2025. Next year's forecast reflects expectations of gradually improving affordability and steady buyer demand.

1:47Mortgage costs should ease a bit in 2026, helping more buyers stay in the market and support modest price growth in many parts of the country. So Zillow is saying they are expecting very modest growth, 1.2%. That is a modest nominal home price. They are predicting, I should mention, real home prices. So inflation home prices would fall in this scenario about 2%. Now, if you didn't watch the episode where I made my own predictions about home prices, My prediction was that home prices will come in a range of negative four to two percent. So I think roughly flat is about where we're going to be. And if you had to ask me today, am I leaning towards plus one percent like Zillow or minus one percent, I would say minus one percent.

2:34But for all intents and purposes, I think Zillow and I are saying pretty similar things here, right? Because it's pretty hard a year out, especially given everything that's going on in the economy to say, yeah, it's going to be just north of zero or just south of zero. But I think the important takeaway here is that both Zillow and I, and I should mention other major forecasters who do these types of projections, are all basically saying they don't expect home prices to move that much on a national basis. And that's really where I've come out. Inventory growth has really sort of stalled out. We're basically where we were a year ago.

3:11It's the same year over year. New listings Things are flat and demand has stayed relatively strong despite all the economic uncertainty. And because of this, we've sort of gotten to this point where there is relative balance in the housing market. You know, for years during the pandemic, it was a strong seller's market. This year, it became more of a buyer's market, but it's coming back closer to balanced, which is why I think both Zillow and I are saying it's going to be relatively close to flat because when things are in balance, that is what happens, right? Things are pretty much flat. Now, the reason I'll just tell you I'm leaning just slightly towards the negative, I would not be surprised at all if they were up 1 % next year, not at all.

3:53But if you're saying why, when I made my predictions back in December, I said just a little bit below zero, it's because I think the economy is really fragile right now. The labor market is really uncertain. Inflation, we haven't gotten data for that in two or three months now because of the government shutdown. But you see all these signs that Americans are stretched and are struggling with affordability. And housing affordability is absolutely part of that. But I think what happens when we see more people struggling to pay their auto loans or struggling to pay their student debt or just pulling back in general, we might see some fall off in demand in the housing market.

4:33Now, that could be offset by falling mortgage prices. But just in the markets I operate, things are cool. Days on market are going up. No one is eager to buy right now. Even though people are buying, it's taking a lot longer. In all the markets I operate in, prices are feeling pretty soft. And that's why I think over the course of next year, they're not super likely to accelerate again unless we see big decreases in mortgage rates, which we'll talk about in just a minute. So for prediction number one with Zillow, I think we're directionally in the same place, saying that home prices are likely to remain close to flat.

5:11I am slightly more pessimistic about prices, but generally, I think we agree. Prediction number two from Zillow says fewer owners will be underwater as prices firm up. Quote, with home values expected to rise in most major markets, fewer homeowners will see their Zestimate fall below what they paid for their home. This stands in contrast to 2025 when home values have fallen in 24 of 50 largest markets as of October. A number of Zillow forecasts will be cut in half to 12 markets next year. Stabilizing prices means more homeowners will continue building equity rather than losing it, at least on paper.

5:52Now, I was trying to not split hairs with the first prediction of being positive 1 % and negative of 1%, but maybe they're making me make a call here because if I am correct and the prices are down a little bit, then I can't agree with the second one and say that fewer owners will be underwater as prices firm up. Because if prices go down even 1%, I think by nature, that means that you're going to have more mortgages underwater. Now, if you don't know what that term means, a mortgage underwater is basically when you owe more on your loan than the property is worth. So maybe you bought a house at$300 ,000, you put 10 % down, so you had only$30 ,000 in equity, you borrowed$270 ,000, prices go down, and now the home's worth$265 ,000.

6:43That is a mortgage that is underwater. Right now, there are about 900 ,000 mortgages that are underwater, which is about 1.5 % of the total mortgage market. And that number has definitely gone up because anytime prices go down, that's when that starts, right? If you're in a constantly growing market, almost no mortgages are underwater, right? Because the value of those properties keep going up and up and up. And so being in a housing correction, like we're in right now, you are of course going to see more mortgages go underwater. So that doesn't really concern me. If you listen to our housing market updates, I talk about this a lot that mortgages being underwater doesn't worry me on its own.

7:22If you have mortgages underwater in combination with forced selling, that's a problem, but there's no signs that that's happening right now. So for me, it sounds like Zillow is saying that the correction that we're in is going to bottom and that we're going to see prices go up again next year. You know, if you're asking me as of today, I don't think so. I think that we are going to be very close to flat. I would say there will be marginally more mortgages underwater in 2026 than there were in 2025, but I don't think it's going to be dramatic. I think it's just going to be a little bit more. All right.

7:56So that was prediction number two. I'm going to disagree with Zillow, but I'm guessing if we each had to forecast the total number of underwater mortgages, they would probably be pretty close, but we're doing this for fun. And so I'm going to say, I disagree with this one. I think this one, underwater mortgages are going to go up. Prediction number three, the one you've probably been hoping I will get to, is mortgage rates will hold above 6%. Sorry for everyone who is holding their breath for lower mortgage rates. Zillow does not see them coming below 6%. They say, quote, Even for the experts, foreseeing mortgage rates a year out is about as difficult as predicting next year's weather forecast.

8:35However, mortgage rates are shaped in part by inflation, and Zillow has been accurately predicting shelter inflation, which makes up 40 % of the consumer price index. Because of that, we are willing to put ourselves on the record. Mortgage rates are unlikely to fall below 6 % in 2026. Borrowers have already seen some relief this year, pushing affordability to a three-year best. Gradual rate moderation should help more buyers re-enter the market, even if ultra-low pandemic error rates remain far out of reach. okay zillow planting their stake in the ground is that a saying plant their what is the saying putting their foot down i don't know they're doing something they are being bold and saying that mortgage rates are not going to come down below six percent and i agree with that i think there might be a point in 2025 where we get into the fives i'm not saying that that's impossible But if you were to ask me for the average of mortgage rates for all of 2026, I believe it will be above 6%.

9:38I said in my December mortgage rate forecast that I think we are going to have mortgage rates stay in the range of 5.5 % to 6.5%. That's for a whole year, right? Mortgage rates move a lot. So if you want to forecast where they're going to be for a whole year, it's kind of hard to just pick a number. So you've got to give a range. That's the range that I am giving. And if you asked me where I think the average will be, if you took an average of every day in 2026, I think they'll be at like 6.1%, 6.15. I don't know. Somewhere just a little bit above six is my guess. That is an improvement from where we are today.

10:14As of this recording, they're in about 6.3%. So I do think there is some room for improvement. I wouldn't be surprised if they fall to six. If they fell to 5.9, I'd be a little surprised, but I'd be happy. But that's within my range. But I agree with fundamentally what Zillow is saying here, that inflation is going to keep mortgage rates higher than most people are forecasting and most people are thinking. This is unfortunate, but inflation is likely to go up for a couple of reasons. You look at things like tariffs. You look at things like our national debt. You look at the price of inputs for manufacturers.

10:50There are a lot of reasons to think that we're not getting below the 2 % target the Fed has set in the next couple of years. And I think there is reasonable risk that inflation keeps going up. I don't think it's going to go crazy, but it might keep creeping up a little bit. And that is likely to keep bond yields and mortgage rates high. I won't get into all of the details of this, but what you should know is inflation is the number one barrier for mortgage rates coming down. And it's really less to do with what the Fed is going to do with in terms of rate cuts and has more to do with inflation.

11:22I think that's the main theme in 2026. And so if inflation starts to come down, mortgage rates can come down more, but it's moving in the wrong direction right now, which is why I agree with Zillow on this one, that mortgage rates on average in 2026 will remain above 6%. So those are Zillow's first three predictions. Home values will rise modestly. I think they'll decline modestly, but I feel pretty aligned with Zillow on that one. They said fewer owners will be underwater as prices firm up. I'm predicting the opposite. but I agree with them when they say mortgage rates will hold above 6%. We do have to take a quick break, but when we come back, we're going to talk about existing home sales and whether sales volume will finally pick up.

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15:44Welcome back to the BiggerPockets podcast. I'm Dave Meyer going over Zillow's 2026 housing market predictions. Before the break, we talked about home prices, we talked about mortgage rates, and we talked about the number of mortgages underwater. Let's move on to Zillow's fourth prediction, which says existing home sales will climb slightly. Zillow's forecast calls for 4.26 million existing home sales in 2026, a 4.3 % increase from this year's projected total. Years of limited inventory and high mortgage rates have created a pent up demand to move that should start to release as affordability improves.

16:23A stronger than expected fall season has hinted at what's possible this spring if recent affordability gains persist. This is optimistic, and I actually agree with them. I think that home sales will climb up a little bit. I think demand has been pretty good this fall, surprisingly good. And although I have my concerns about the economy, I do think demand is not going to fall off a cliff. I think we might see more supply than people are expecting. And some of the delistings that have been coming off the market recently might go back up, which is why I'm kind of leaning towards modestly negative home prices next year.

17:01But I am optimistic that we will start to see more home sales. Now, I know for most people, home prices and those predictions are what people really care about. That's kind of the sexy thing to look at. But for the housing market to get back to a healthy level, we got to have more home sales. It's just slow. This year, we are on pace for about 4 million existing home sales, which may sound like a lot, but it is well below the long-term average of 5.25 million. So we're more than 20 % down from normal. And it feels particularly dramatic because during the pandemic, we were at abnormally high levels of home sales, like 6 million.

17:42And so we're down about 50 % from where we were in 2022. That's why the market, I think, feels so slow to people. But for anyone who works in the industry, if you're an agent, a lender, a property manager, this should be good news. It's probably not where you want to be. They're saying it will go up to four and a quarter million. It's not a good year. In any other year, this would be a bad year, right? But we got to see things turn around and hopefully they are correct. And this is a baby step towards more housing activity in coming years. And so I'm going to agree with this one that existing home sales will climb slightly.

18:20Zillow's fifth prediction is about new construction. They say new construction will see its weakest year since before the pandemic. Zillow says, quote, 2026 is shaping up to be the slowest year for single-family home construction start since 2019, following a notably weak year in 2025. Because there's a large stock of new homes already built and others still under construction, builders are expected to hold back on starting new projects. Single-family starts are trending 5 % below last year's pace as of the latest reading in August. A further 2 % drop off of that pace in 2026 would bring starts below the roughly 947 ,000 homes begun in 2023, currently the low-water mark since the start of the pandemic.

19:07Expect builders to continue leaning heavily on incentives such as rate buy-downs to keep inventory moving, particularly in markets where affordability remains tight. So do I agree that we'll see less total new construction starting in 2026 than 2025? Yeah, I think that's probably likely. We have seen an incredible amount of incentives had to be used to move inventory in 2026. And with just unclear forecasts for inflation and affordability, builders might pull back a little bit further in 2026. So I generally agree with this. But I just want to say like their headline that this is going to be the weakest year for new construction since before the pandemic.

19:52That's from the builder's perspective. I just want to offer a different perspective because from a buyer's perspective, from an investor's perspective, this might be the best year for new construction that we have ever seen. Actually, as of this recording, the median price for a newly built home is cheaper than that of an existing home. That has never really happened before. And this, I have said before on the show, I think is a really interesting opportunity for investors because of all the things Zillow just said, and I agree with, builders are offering huge incentives. They're buying down mortgage rates.

20:29They're offering seller concessions. They're offering free upgrades to sort of like spruce up the finishes on a home. They don't really like lowering the price, but if you negotiate really hard, they might be willing to do that. But they'll probably do lots of other things worth tens of thousands of dollars to get you to buy a home. And so I continue to believe that we're in this very unique time where new construction is a viable option for real estate investors. It's not good everywhere. It really depends on the location. A lot of new construction happens to be out in sort of these like remote, random kind of tertiary markets or like in the suburbs of a tertiary market.

21:08I wouldn't buy that stuff personally. But there are places where you can actually, in good markets with strong fundamentals, buy new construction at a good rate. It's probably not going to be the best cash on cash return ever. But if you can find ones that's cash flowing, you might actually do better on that in terms of cash long term because your CapEx, your repairs, your maintenance costs are going to be lower. And that's really appealing because, you know, everything is brand new. But also, secondly, if you're getting a rate buy down into the fours, which I have absolutely heard happening. This is definitely happening.

21:41A rate died down into the fours, definitely into the fives. Your cashflow might not be that different from an existing home because yeah, you might be paying a little bit more. Maybe not depending on the market you're in, but your costs are going to be a little bit less. Your rent's going to be higher because you're renting out a brand new home and your financing costs might actually be lower. So I think this, the weakness that Zillow is citing for new construction is actually strength for investors and buyers of new construction. It's one of the things I've personally looked at a little bit. There's not a lot of new construction in the markets I'm investing in right now.

22:18So that's the reason I haven't pulled the trigger on it. But I know other investors in Texas and Florida who are doing these kinds of deals because they're getting deep value on them. So something depending on where you live, you could consider for your 2026 strategy. All right, let's move on to Zillow's sixth prediction, which is that apartment renters will see relief. They say rent affordability is expected to continue improving in most of the country after a year in which 35 of the 50 biggest markets saw incomes grow faster than rents. A median income household would spend 27.2 % of income on the typical US rent as of October, the lowest share since August of 2021.

22:59Zillow forecasts multifamily rents to rise just 3 % in 2026, giving incomes a chance to catch up even further. Single family rents are projected to climb by 2.3 % as many buyers delay home purchases. Okay. So will apartment renters see relief? Yes. I agree with this one for sure. I think there's an important caveat for everyone to understand because you might be thinking Zillow just said, you know, rents on single family homes are projected to go up 2.3 % as of this year. How is that relief for apartment renters? And this just comes down to some basic economic stuff here. But what Zillow is saying is that if rents go up only 2.3 % for a single family home, but wages, the average amount that people earn is up, let's say 4%, it's kind of close to where it is today, went up 4%, then relatively rents are getting cheaper, right?

23:56Even though the price you pay on paper is going up, your ability to afford that rent is improving because your income is rising faster than your rent. And I do agree with that, particularly on the multifamily side. I don't think we're going to see much growth in rent on multifamily. They're close to flat. They've been flat for a while. I know that we are working through this multifamily glut. I am very well aware of that. But I just think this is just me. I think household formation is going to be muted in the next year. We're seeing data from all over the economy that people are struggling. You know, car payment delinquencies are going up.

24:35Student loan delinquencies are going up. It's not an emergency by any means, but it can weigh on household formation. The other piece of this, though, is the wage piece. And I am hopeful that wage growth will continue to stay positive. There is this thing in economics, it's called real wage growth. It's like, our wage is growing faster than inflation. And that has been one of the bright spots of the economy since, I think it was February 2023, we sort of crossed this threshold where wage growth was higher than the rate of inflation. And that has still happened. We've had that for the last, I guess it's almost two years now.

25:15We've had real positive wage growth. Now, the amount of that real wage growth has declined a little bit. It's about 2 % a year ago. Now it's about 1%, but I'm hoping that that will continue. I do have some fears about that. I will be honest with AI and rising unemployment rate. People tend to lose negotiating leverage in their wage negotiations, and so that can lead to lower real wages. but I am optimistic that wage growth will stay above the pace of rent increases. So I say yes to Zillow. Apartment renters will see some relief. All right. We have made it through six of Zillow's 10 predictions for the 2026 housing market.

25:56I got four more for you though. We got to take a quick break. We'll be right back. The Cashflow Roadshow is back. Me, Henry, and other BiggerPockets personalities are coming to the Texas area from January 13th to 16th. We're going to be in Dallas. We're going to be in Austin. We're going to Houston. And we have a whole slate of events. We're definitely going to have meetups. We're doing our first ever live podcast recording of the BiggerPockets podcast. And we're also doing our first ever one-day workshop where Henry and I and other experts are going to be giving you hands-on advice on your personalized strategy.