Last updated on February 18th, 2026 at 04:32 pm
The housing market has been through a wild ride over the past few years. From pandemic-era bidding wars to mortgage rates tripling, buying a home has felt like an uphill battle. But 2026 is shaping up to be a turning point.
Economists are calling it “The Great Housing Reset” – a shift toward a more balanced market where wages are finally growing faster than home prices. So what should you expect and how can you prepare?
Mortgage Rates Will Stay Above 6%
The days of 3% mortgage rates are long gone. The average 30-year fixed-rate mortgage hovered around 6.6% in 2025 and is projected to average 6.3% in 2026, according to both Redfin and Realtor.com forecasts.
While that’s higher than the historic lows of 2020-2021, it’s important to keep it in context. Rates in the 6-7% range are actually close to the historical average over the past several decades. If you’re waiting for rates to drop back to 3%, you could be waiting a very long time.
The good news: even a modest drop from 6.6% to 6.3% can save thousands over the life of a loan.
Home Prices Are Growing – But Slowly
The era of double-digit price gains is over. The median price for an existing home sold in January 2026 was $396,800, up just 0.9% year over year, according to the National Association of Realtors.
Most forecasters predict home prices will rise just 1-2% in 2026 – far below the 14-19% annual gains seen in 2021. J.P. Morgan even expects prices to stall at 0% nationally. This is good news for buyers, as wages are expected to grow faster than home prices for the first time since the aftermath of the 2008 financial crisis.
That said, there are regional differences. Prices are still rising faster in the Northeast and Midwest where there’s less new construction, while the South and West are softening as pandemic-era migration slows and insurance costs climb.
Inventory Is Improving – But Still Tight
Historically, a healthy real estate market has around 6 months of unsold inventory. At the peak of the shortage in 2021-2022, some markets had less than 1 month of supply.
As of January 2026, inventory stood at about 4.2 months’ supply on a seasonally adjusted basis – up from 3.9 months a year earlier. That’s 24 consecutive months of year-over-year inventory growth, with the number of homes on the market about 15% higher than a year ago.
More homes on the market means less competition, fewer bidding wars, and more negotiating power for buyers. We’re not back to a balanced market yet, but we’re headed in the right direction.
Top Tips For Buying a House
Even in a normalizing market, preparation is key. Here are Capital Bean’s top tips to prepare to buy.
Speak To Some Lenders And Get Pre-Approval
Speaking to a lender as soon as possible is always a good strategy when you need to borrow money for a home. It’s not just to apply for a mortgage but understand exactly what you’ll need to do if you make an offer on a property and it is accepted.
Also – if you’re pre-approved, a seller will take your offer more seriously because they know you’ve passed some initial criteria tests from the banks. A pre-approval does not mean that you will get the mortgage, it just means that you’re more likely to based on the information that you’ve given the bank.
If you can scrape together a larger down payment then this will give you a better rate from the bank and give the seller higher confidence.
For your pre-approval, you’ll still need to submit lots of paperwork and so make sure your finances are in order. A pre-approval gives you the terms of a mortgage under certain conditions and so make sure to read them carefully. Many real estate agents will insist that you’re pre-approved before they even show you places.
Make sure to apply for a pre-approval with more than one lender so you can get a comparison across the board. When you get your loan estimate, it will be in a standard format that lenders have to give any borrowers. You’ll get to see all of your loan costs including monthly payment, interest rate, and any closing costs.
See also our guide on how to buy a home.
Find Yourself an Excellent Local Real Estate Agent
Knowing the local market is key when trying to move quickly on a property. Even before you’re looking to buy a place, it’s worth building relationships with local realtors. This means that when you are ready to look for a place, it won’t be starting from cold and you’ll know who to talk to and when.
An experienced agent knows what’s going on in the local area including proposed building work or new infrastructure and will help you find a place that is right for you. Ask for recommendations from friends and family for good realtors and talk to a couple before you decide to work with one.
Map Out Expectations That Are Realistic
Expectation management is important in all walks of life and none more so than buying a place. If you’re working with an experienced realtor, they should help you set your expectations, but do some desk research ahead of time to know what you can or cannot afford in a local area.
Make a list of wants and needs and understand that you might need to compromise on some of the things that you want. Depending on the location you can change everything about a property except for the location and so choose one that you enjoy. You’ll be spending a lot of time there.
Knowing what kind of property you want is essential to plan your budget and expectations.
Know Your Upper Price Limit
Before physically viewing any properties, make sure you know the upper limit that you’re willing to spend on a property. Make sure you know how that deal will be structured and what you’re willing to negotiate on before you go into a deal.
Especially in a competitive market, there could be a tendency to keep increasing your upper limit without fully understanding what this means for your finances. Make sure you know when you’re going to cut yourself off from negotiating as it can be a very emotional process.
Don’t Jump The Gun
Just because you’re working with a professional realtor doesn’t mean that you can stop being vigilant in the market. Always be looking for properties across different websites and other realtors’ listings as you never know when a gem might pop up.
Sometimes you have that perfect list in your head but you find a place that doesn’t tick any of those boxes but is exactly what you’re looking for. We spoke to one client who was looking for a two-bedroom, non-ground floor, with outdoor space and as close to the city center as possible. They finally found a place. It was on the ground floor, with one bedroom, no outdoor space, and on the outskirts of the city. It emotionally ticked their boxes and because it was a large space they made it their own.
Keep an open mind, know what you want and know what you need and you’ll find a dream home.
Frequently Asked Questions
What are mortgage rates expected to be in 2026?
The average 30-year fixed-rate mortgage is projected to average around 6.3% in 2026, according to Redfin and Realtor.com forecasts. While this is higher than the historic lows of 2020-2021, it is close to the long-term historical average.
Are home prices going up or down in 2026?
Most forecasters predict home prices will rise just 1-2% nationally in 2026, far below the double-digit gains of 2021. J.P. Morgan expects prices to stall near 0%. Regional differences exist, with the Northeast and Midwest seeing stronger growth than the South and West.
Is 2026 a good time to buy a house?
2026 is looking more favorable for buyers than recent years. Inventory is improving (about 4.2 months’ supply), wage growth is outpacing home price increases for the first time since the 2008 crisis, and there are fewer bidding wars. Getting pre-approved and working with an experienced local agent are key first steps.
How much do I need for a down payment?
Down payment requirements vary by loan type. Conventional loans typically require 5-20%, FHA loans as little as 3.5%, and VA loans may require no down payment at all. A larger down payment generally results in better mortgage terms and lower monthly payments.
