Mortgage Rates Will Stay Above 6% in 2026, Zillow Predicts

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Mortgage rates are expected to stay above 6% throughout 2026, according to Zillow’s latest housing market forecast. The real estate company put itself on record predicting rates won’t dip below that threshold next year despite some gradual easing.

Zillow acknowledged that forecasting mortgage rates a year ahead is difficult. However, the company pointed to its track record accurately predicting shelter inflation, which makes up 40% of the consumer price index. Mortgage rates get shaped in part by inflation trends. 

Borrowers already saw some relief in 2025, pushing affordability to a three-year best. Gradual rate moderation should help more buyers reenter the market in 2026, even if ultralow pandemic-era rates remain far out of reach. 

Home Values Will Rise Modestly

Zillow forecasted U.S. home values to grow 1.2% in 2026 after national values stayed roughly flat in 2025. The forecast reflects expectations of gradually improving affordability and steady buyer demand. Mortgage costs should ease slightly in 2026, helping more buyers stay in the market and supporting modest price growth. 

The number of major markets seeing annual price declines will drop sharply. Home values fell in 24 of the 50 largest markets as of October 2025. Zillow forecasted that number will be cut in half to 12 major markets next year. 

Stabilizing prices means more homeowners will continue building equity rather than losing it. Fewer owners will see their Zestimate fall below what they paid for their homes. 

Existing Home Sales Will Climb

Zillow projected 4.26 million existing home sales in 2026, a 4.3% increase from 2025. Years of limited inventory and high mortgage rates has created pent-up demand to move that should start releasing as affordability improves. 

A stronger-than-expected fall season hinted at what’s possible this spring if recent affordability gains persist. 

The housing market should settle into a healthier state in 2026. Buyers will see a bit more breathing room while sellers benefit from price stability and more consistent demand. 

New Construction Will Slow Down

The year 2026 is shaping up to be the slowest for single-family home construction starts since 2019. Builders are expected to hold back on starting new projects because a large stock of new homes already sits built or under construction.

Single-family starts were trending 5% below 2024 levels as of August 2025. A further 2% drop in 2026 would bring starts below the roughly 947,000 homes begun in 2023, currently the low point since the start of the pandemic. 

Builders will continue leaning heavily on incentives such as rate buydowns to keep inventory moving, particularly in markets where affordability remains tight. 

Rent Affordability Will Improve

Rent affordability is expected to continue improving after 37 of the 50 biggest markets saw incomes grow faster than rents in 2025. A median-income household would spend 27.2% of income on the typical U.S. rent as of October, the lowest share since August 2021. 

Zillow forecasted multifamily rents to rise just 0.3% in 2026, giving incomes a chance to catch up even further. Single-family rents are projected to climb 2.3% as many buyers delay home purchases. 

New York City stands as a notable exception. StreetEasy economists expected rent growth there to accelerate next year, bucking the national trend. 

What This Means for Buyers and Sellers

The combination of mortgage rates above 6% and modest home value growth creates a more balanced market than recent years. Buyers won’t see the dramatic price drops some hoped for, but they’ll face less intense competition and more inventory choices than during the pandemic housing frenzy.

Sellers can expect price stability instead of the wild appreciation of 2020 and 2021. More consistent buyer demand should make it easier to sell without resorting to major price cuts in most markets.

The gradual improvement in affordability comes from multiple factors working together. Slightly lower mortgage rates combine with rising incomes and slower price growth to bring more buyers back into the market. The pent-up demand from years of sitting on the sidelines should start releasing in 2026.

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