Name: 2026 will be next chapter of housing market story
Uploaded: 2025-12-13T00:37:04.334Z
Duration: 4 min 30 s
Description: Mike Simonsen, Compass Chief Economist, says he expects increased incomes to improve housing affordability in 2026.

Mike Simonsen, Compass Chief Economist, says he expects increased incomes to improve housing affordability in 2026.

New York

Compass Chief Economist Mike Simonson predicts that 2026 will begin a new chapter for the US housing market, characterized by flat or slightly declining home prices and rising sales. This shift follows several years of persistent price increases and reduced affordability, with incomes now expected to rise faster than home prices, leading to improved affordability for buyers.

Simonson notes that increased listing withdrawals in 2025 indicate pent-up demand from owner-occupiers who have delayed moving. Markets such as Florida are already seeing higher transaction volumes, and other regions like New York and Chicago are expected to follow as inventory rises. The forecast does not rely on a drop in mortgage rates, but lower rates could further boost sales activity in early 2026.

2026 will be next chapter of housing market story

For more Compass, Chief Economist Mike Simonson joins us now. Mike, great to see you. Nice to be here, Melissa. You say home prices, national home prices in 2026 could be flat. Is that going to be enough to spur demand, just a flat market compared to the increases that we've seen year on year on year? So we actually look at 2026 as sort of the start of a next era of the housing market. So in the last four years, sales have been at really deep freeze levels and prices kept pushing relentlessly higher. So affordability gets worse. In the next era, that story flips. So sales are starting to move higher, but prices capped or maybe down, incomes are rising faster than prices. And so affordability improves for the first time in a bunch of years. It's not a dramatic improvement, but it's the start of the new era. Compass has always been a retail brokerage firm that prides itself on data and being digital. And I'm wondering what in the data that you see at Compass when it comes to listings, how listings are handled, give you this sort of insight and this belief that this is going to happen in 2026? I mean, I love real estate. I follow it just as sort of a hobby in the New York area. And what I've noticed, at least, is that listings, if they don't move after a certain time, they're put on hold. There are no price cuts, but people are holding and they hold the listing and then they put it back on the market a few months later. And this happens again and again and again. Same home. Yeah. And that is the withdrawal phenomenon. So withdrawals were higher in 2025, notably higher. And an interesting thing, it can be tempting to look at that as shadow supply, like supply inventory that's going to hit the market. But when you look at that, the people in there actually tend to be owner occupiers. So those folks are really folks who want to buy and sell. It's like two transactions. And so in an environment where conditions improve a little bit, we actually estimate that that's a representation of shadow demand. People that want to move, people that have delayed moves for maybe four years now. And we estimate there's about 150,000 of those people who would like to do two transactions next year. So in the right conditions that actually represent that those withdrawals actually represent demand rather than just supply next year. In what markets do you anticipate seeing the most velocity of transaction in 2026? The fascinating one right now is Florida. So the weekly pending sales in Florida are coming in 10 or 15 percent above last year at this time. So that's a new shift for the Florida market. In places like the New York tri-state area or the Chicago area, those have been limited by tight inventory. So sales growth has been limited as well. In the next year, as inventory climbs a little bit, that allows more sales to happen in those markets as well. In your forecast for 2026, is there anywhere do you have to see any sort of decline in mortgage rates? Or can we assume that even if mortgage rates stay exactly where they are, that what you're predicting for 2026 will still unfold? I like to say that consumers are more sensitive to changes in rates than to the absolute levels. And so if they stay in the low sixes, that is roughly what our forecast is. And that means that sales can grow a little bit. Prices are capped. There's sufficient inventory so that prices are capped generally across the country. And if rates, we get lucky and rates fall towards six percent in the first quarter, that would push the sales numbers up higher in the first and second quarter of the first half of the year, when home buying activity is the strongest. Transcribed by https://otter.ai

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