Real Estate Rookie — Episode Summary
Podcast: Real Estate Rookie (BiggerPockets)
Episode: Redfin: The Great Housing Market “Reset” Starts in 2026
Date: December 24, 2025
Host: Dave Meyer (of On The Market, in this rerun), with guest Chen Zhao (Redfin’s Head of Economic Research)
Main Theme
This episode centers on Redfin’s bold projections for the U.S. housing market, focusing on what Chen Zhao and her team dub “The Great Housing Reset” beginning in 2026. Rather than a dramatic crash or rapid rebound, they envision a slow, multi-year normalization where improved affordability, shifting regional trends, and cautious policy moves will gradually reshape buying, renting, and investment strategies. The hosts walk through Redfin's 11 key predictions for the impending real estate cycle—including mortgage rates, home prices, transaction volume, rents, policy, and technology.
Key Discussion Points & Insights
1. The “Great Reset” — A Slow Path to Affordability
[02:37–03:56]
- Chen Zhao notes that 2026 will be the start of a prolonged reset in the housing market, rather than a sudden correction or recession.
- Affordability will slowly improve—no quick fixes or “silver bullets.”
- Improved buyer affordability is already visible in late 2025 but major changes will take years.
Quote:
"We think next year is the start of better affordability for home buyers." — Chen Zhao [03:10]
2. Prediction 1: Mortgage Rates Will Stay in the Low Sixes
[04:13–06:06]
- Rates are unlikely to fall into the 5% range or rise to 7% for a sustained period.
- Fed is balancing competing mandates (inflation vs. unemployment); major rate moves are improbable.
- Upcoming Federal Reserve leadership transition adds more unpredictability, but committee-driven policy means limited radical change.
Quote:
"We don't expect mortgage rates to get into the fives, not for any sustained period of time… And we also don't really expect mortgage rates to get back up to 7% either." — Chen Zhao [04:13]
3. No Dramatic Fed Interventions Likely
[06:57–08:58]
- The Fed is unlikely to try to actively lower mortgage rates via quantitative easing or buying mortgage-backed securities.
- Prioritize inflation control; boosting housing activity risks reigniting price spikes.
- The real “medicine” is for prices to ease, not for rates to fall.
Quote:
"After all the scars and PTSD from the last few years with high inflation, I just can't imagine that [the Fed] would really choose to do that.” — Chen Zhao [07:53]
4. Prediction 2: Home Prices Will Grow Slower Than Wages
[08:58–13:55]
- Home price appreciation has slowed (from 5% YoY in early 2025 to just above 2% by year-end).
- The market shift from “seller’s market” to “buyer’s market” continues—more inventory, fewer buyers.
- Delistings are up; sellers would rather wait than accept lower offers.
- Real affordability gain comes as wages outpace slow home price growth—not dramatic price drops.
- This adjustment is slow; buyers may not perceive relief for 5-6 years.
Quote:
“It is boring, I guess, in some sense to say, look, home prices are going to maybe increasing like 1% or 2%, like something very low. Right. But it's actually a meaningful change for buyers...” — Chen Zhao [13:04]
"Home prices are growing slower than wages. And that is what buyers actually need." — Chen Zhao [13:55]
5. Prediction 3: Sales Volume Increases Slightly—But Still Sluggish
[17:30–18:50]
- Existing home sales expected at 4.2 million in 2026, up from 4.1 million—a ~3% increase.
- Volume remains historically low; stalemate between buyers and sellers will persist.
Quote:
“...not going to get this huge pickup in the housing market next year.” — Chen Zhao [18:13]
6. Prediction 4: Rents Begin to Tick Up
[18:50–19:45]
- After years of flat or falling rents, minor increases expected late in 2026 as multi-family construction cools and more people stay renters.
- New demand drivers: sluggish homebuying, weaker labor market.
- Real rent growth may simply match inflation, not outpace it.
7. Prediction 5: More Roommates, Fewer Babies
[20:12–21:59]
- Economic strains and housing costs drive more shared households and may delay family formation.
- Affordability improvements will take years, impacting demographics and the demand for larger homes.
8. Prediction 6: Policy Action (But Supply Challenges Remain)
[22:52–28:08]
- Housing affordability will dominate political agendas.
- Expect proposals (some effective, some not)—but the real solution requires more housing supply, not just demand-side incentives.
- Local jurisdictions have the real power, and progress is piecemeal; federal influence is mostly financing, not supply control.
Quote:
"Most of the proposals that get put forward are on the demand side and as we all know, that's not actually what is helpful. We just have to address what is actually happening on the supply side." — Chen Zhao [26:18]
9. Prediction 7: More Refinancing and Remodeling
[28:15–29:39]
- As rates hover just above 6%, about 20% of recent buyers with higher rates become eligible to refinance when rates drop modestly.
- Equity-rich owners will remodel rather than move, fueling renovation demand.
10. Prediction 8: Regional Market Winners and Losers
[32:22–35:21]
- Suburbs around NYC, parts of the Midwest predicted to outperform (more buyers than sellers, healthy demand).
- Sun Belt markets (Florida, Texas) lag, with far more sellers than buyers (in some cases, double)—see continued weakness in 2026.
- Expect performance gap to persist but moderate over time.
Quote:
"A lot of these metros have 100, 150, sometimes 200% more sellers than there are buyers." — Chen Zhao [34:24]
11. Prediction 9: Climate Migration Becomes Local, Not National
[35:45–38:29]
- Climate risk and rising insurance costs are on buyers' minds, but decisions will likely prompt moves within a metro (to less flood/fire-prone neighborhoods), not massive cross-country migrations.
- Insurance data is the best proxy for measuring climate-driven housing shifts.
12. Prediction 10: Industry Changes—NAR & MLS Decentralization
[38:33–39:18]
- National Association of Realtors shifts its focus to advocacy, letting local MLSs gain more autonomy in setting their own rules amid broader industry tumult.
13. Prediction 11: AI Becomes the Real Estate Matchmaker
[39:29–41:43]
- AI tools (like Redfin’s conversational search) begin to transform how buyers search and select homes—enabling natural-language, needs-based searches.
- Potential for AI to aid negotiation or transaction processes is still several years away, pending trust and technological maturity.
Quote:
"AI will become a real estate matchmaker. We're already starting to see this… Instead of going through the search filters, you can have a conversation and describe what you want in your home search." — Chen Zhao [39:38]
Notable Quotes & Memorable Moments
- "It's going to be a slow process, maybe five to six years before buyers actually notice—‘Hey, affordability has gotten better.’" — Chen Zhao [13:58]
- “As you age, your metabolism changes… For the housing market, we actually do need to just see lower home prices. That's the right way to get the housing market back to a healthy state.” — Chen Zhao [07:53]
Timestamps for Key Segments
- [02:37] — Market “reset” headline
- [04:13] — Mortgage rate predictions
- [08:58] — Home price growth slows
- [13:58] — Affordability improvement process
- [17:30] — Sales volume outlook
- [18:50] — Rental market forecast
- [22:52] — Policy and affordability
- [28:15] — Refi/remodeling trend
- [32:22] — Regional market dynamics
- [35:45] — Climate migration
- [38:33] — NAR decentralization
- [39:29] — AI in real estate
Final Takeaways
- 2026 signals the start of a multi-year journey toward housing market normalization, with gradual improvement on affordability—no quick crash or boom.
- Regions diverge: Midwest and Northeast suburbs gain; Sun Belt struggles continue.
- The biggest solution to affordability is more supply—a tough nut for policy to crack.
- AI and tech innovation will gently reshape how Americans buy homes, but the human touch (and patience) still matters.
If you’re a renter, buyer, landlord, or first-time investor, Redfin’s predictions offer a clear-eyed, realistic roadmap for what to expect—and how to strategize—over the coming years.