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Will home prices go up or down in 2026? We have seen a historic run of home price appreciation, with values rising year after year even as mortgage rates have remained high. But will that continue next year? Or will we see prices flatten or even decrease in the year to come? Today, I'm giving you my 2026 home price forecast.
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Hey everyone. Welcome to the BiggerPockets podcast. I'm Dave Meyer. Excited to have you here for what is simultaneously both my favorite and least favorite show of the year predictions about the next year. I genuinely enjoy and love the data analysis and research that goes into making these predictions, and since I started doing this back in 2022, I've been pretty accurately in calling the direction of the housing market. But at the same time, it's a little nerve wracking and difficult to put these predictions out in public, especially this year when there's less data available due to the recent government shutdown. But despite those limitations, I choose to make these predictions for you every year because having an idea of where the market is heading, even if it's not 100% accurate, as no forecast is, this is still crucial as an investor because you invest differently in a rapidly appreciating market than you do in a flat or a correcting market. And don't get me wrong, you can invest in any kind of market, but you do need to plan accordingly and that's what I'll help you do today. By the end of this episode, you'll know where the market is likely to go, what things to watch for in case things start to change, and how to build your portfolio accordingly in 2026. Let's do it. So making predictions about the housing market is difficult because the housing market is driven by so many different variables. On one side you have all these things that impact demand, how many people want to buy homes. These are things like demographics, immigration, cultural shifts, domestic migration, investor activity, and so on. Then you have this whole other set of variables that impact the supply side, like the lock, in effect construction trends, a long standing shortage in homes in the United States, and so on. But to me, and I have been on this trend for a while now, affordability is the number one variable driving the market these days. Now why this variable among all the other ones out there? Well, we have hit an absolute wall in terms of affordability. We are near 40 year lows. And by the way, if you haven't heard this term before, in context of the housing market, it just means how easily the average American can the average priced home and that's at 40 year lows. It hasn't been since the early 1980s that has been this difficult for the average American to buy homes. Now this is really crucial because what has not changed is that people do want to buy homes. There is still desire to buy homes. But when you look at demand, this economic term, demand, it's not just desire, it's desire and the ability to pay for it. We still have the desire side. The issue is that most Americans just cannot afford it. And in my view, if that doesn't change, if affordability doesn't move, not much is going to change in the housing market. But if affordability improves, so will the market. So affordability, this key thing is actually made up of three individual variables. We have home prices. How much do homes actually cost? That should make sense. We, we have mortgage rates because the majority of homes are purchased with a mortgage. And so this matters a lot. And we also have wages. How much are people earning? So those are the three things and we're going to break each of them down one by one. So the first factor in affordability is mortgage rates. I did a whole episode about that, but the TLDR was that although I think they could come down a little on average next year, I don't think they're going to move that much. So I think it could modestly help affordability, but it's probably not going to be the, the thing that really changes the housing market. The second one is wages. And real wage growth can improve affordability. Real wages, if you haven't heard this term, is basically just a question of are incomes rising faster than inflation? If the answer to that is yes, you have positive real wage growth, the answer to that is no, you have negative real wage growth. But luckily, right now, one of the bright spots for the economy in recent years, since 2022 or so, is that we have had real wage growth wages. In America, incomes are growing faster than inflation, which means your purchasing power is going up. I hope that will stay up, but I think it's going to slow. In the next year, we've seen inflation up to about 3%. The job market is definitely weakening. That reduces leverage and salary negotiations. And I think wage growth will slow. But the thing about the housing market and how this relates to our strategy as investors is that even in the best times, wage growth takes time to really impact affordability. So although wage growth does really matter, it's probably not a big factor in 26. So if rates aren't going to change that much, in my mind, in Our base case and real wages are not going to impact affordability that much. Does that mean that the housing market is doomed to have another year like we had this year, where things are pretty slow and stuck? Maybe, but we still have one more variable, which is housing prices. Which is why my base case for next year is for home prices to be flat or maybe down just modestly. If you want some actual numbers, I like to predict a range and a direction because I think as real estate investors, it actually hurts us to obsess about is it up 1% or 2%. I think we actually should just say, hey, it's up modestly, it's down modestly, it's flat. This year, it's going to go up a lot, there's going to be a crash. This. Those kinds of directional indicators, I think, are what's really important. And what I see is that home prices in 2026 are going to be between negative 4% and positive 2%. You could call this flat if you want. I am personally leaning more towards the negative side right now. Again, we don't have data from the last couple of months, but the way trends are going, I think if I had to pick where we'll be a year from now, I'd say negative one, negative 2% year over year growth. So you might be surprised hearing me say this because all previous years I've said we've been flat or up because I genuinely believe that and that was what actually came to be. But this year I see that changing. And I just want to say having these kinds of declines, this isn't crazy. Seeing modest declines in prices isn't a crash. It's not even unusual. It is a normal correction and I should probably mention a buying opportunity. And that said, I am a little more pessimistic, I think, than other forecasters. I see Zillow at +1%. Some others are near flat, but most of them are modestly positive. But we're all still generally in the same range. Like honestly being plus 1%, minus 1%, it's kind of flat. Right? So that's what most people are saying. And I think the takeaway here, whether you think it's plus 1% or minus 2% is the same. Appreciation is going to be slow at best. It might be negative. We can't know right now with the little data that we have, but we have to not count on appreciation. I think that's the main takeaway for us as real estate investors. Maybe we'll get 1%. That would be great. Maybe it'll be negative 1%, honestly, whatever. If you're counting for flat or you are not counting on inflate appreciation when you're underwriting your deals, you can still invest in your this market. But that's the main takeaway I want you all to have right now is that you should not assume you are going to get appreciation in 2026. So that's my belief about what's going on in terms of nominal prices. It's gonna get a little wonky. But stay with me. Nominal prices means not inflation adjusted. This is the price that you see on paper. This is the price that you see on Zillow. People are split on whether that's gonna be up a little bit, down a little bit, but what Almost every forecast that I believe in, that I think is reputable, all of them agree that real prices are going to be negative. And again, real in economic terms just means inflation adjusted. So every forecast I see believes that compared to inflation, home prices are going to go down. So even if prices on paper go up 1%, but inflation stays at 3%, then real home prices have declined 2%, real prices are down. And even though I'm saying I think the most likely scenario is that nominal prices are down next year, I feel much more confident that real prices will be down in 2026. That much seems pretty clear to me. So that's my base case. It's what I've called the great stall in recent months. Have you listened to the podcast? And it's still what I think is the highest probability of happening next year because affordability is too low. Rates will come down a little bit, I think, but not that much. Wages aren't really going to help us one way or another. And prices if they flatten or modestly decline, that's how we get into the stall period, where affordability gradually gets restored to the housing market. That is the base case. But I should say that when I make these forecasts, I like to be honest about my confidence level. And I just want to say that this year it is lower than previous years. Last year I felt really confident about what I said was going to happen. That was pretty accurate. And this year I think the great stall is probably a 50ish, maybe 60% probability, which means that we have a 40 or 50% chance that something else could happen. And I'll give you some alternative forecasts and predictions right after this break. Running your real estate business doesn't have to feel like juggling five different tools with resimpli. You can Pull motivated seller lists, skip trace them instantly for free, and reach out with calls or texts, all from one streamlined platform. 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