In 2026, halfway through the year, the U.S. real estate market is experiencing a transition from a “deep freeze” to a “slow repricing,” but a full recovery is not yet in sight. The market remains relatively soft overall, influenced by persistently high mortgage rates, with buyers and sellers adopting a cautious attitude and significant regional variations in performance.
The first half of the year presented five coexisting phenomena:
Expectations for significant interest rate cuts were high earlier in the year, but due to the robust performance of the U.S. economy and concerns over inflation sparked by the Middle East conflict, the Federal Reserve (Fed) chose to maintain benchmark interest rates in the range of 3.5% to 3.75% in April.
Throughout the first half of the year, 30-year fixed mortgage rates hovered around 6.3% to 6.5%. Consequently, over half of homeowners still have existing mortgage rates below 4%, with as many as 80% benefitting from rates below 6%. This “lock-in effect” has led to many homeowners opting to stay put, significantly limiting the release of existing homes onto the market.
According to data from the National Association of Realtors (NAR), in June, the seasonally adjusted annual rate of existing home sales in the U.S. stood at 4.09 million units, a 2.4% decrease from May but a 2.8% increase compared to the same period in 2025. While the market showed slight activity compared to the previous year, a robust rebound has not yet materialized.
Therefore, the market in the first half of the year can be described as having demand, but with a majority of buyers only entering the market when rates briefly drop and sellers are willing to negotiate.
With inventory still relatively low, the overall median home price in the U.S. has not collapsed but rather oscillated at a high level. In June, the median price for existing homes reached $440,600, a marginal 1.8% increase from the previous year, setting a new record. However, this does not mean every home appreciated by 1.8%, as the median price is influenced by factors such as the proportion of high-end home sales, location, and housing type.
Projections from institutions like J.P. Morgan suggest that with supply and demand offsetting each other, the average national housing price increase for 2026 is expected to stall at around 0%, while Realtor.com anticipates a mild growth of approximately 2%.
Examining the Case-Shiller home price index for repeat sales, the U.S. house prices saw only a 0.8% annual increase in April. As inflation stood at around 3.8% during the same period, home prices have shown “real declines” for 11 consecutive months, where nominal prices have risen slightly, but adjusted for purchasing power, values are actually decreasing.
For example, if a house was worth $1 million last year, with an 0.8% increase this year, it reached $1.008 million. However, with general price increases of 3.8%, the house should theoretically be priced at around $1.038 million to maintain last year’s purchasing power, indicating a real value decline of approximately 2.9%.
Analyzing prices regionally, the first quarter data for existing single-family home sales revealed: annual increases of 3.9% in the Northeast and 2.7% in the Midwest, buoyed by limited supply. Meanwhile, the South and West saw modest increases of only 0.9%, with some markets even lowering prices due to higher inventory levels, although the regional averages did not experience significant declines.
Thus, several seemingly contradictory phenomena in the first half of the year could be observed simultaneously: record highs in median home prices, only slight increases in overall house price index, downward adjustments in listing prices, and value declines adjusted for inflation.
Looking ahead to the second half of the year, mainstream forecasts do not foresee extreme scenarios of skyrocketing or collapsing markets. Whether from government support agencies, real estate associations, major media outlets, or analysts, most expect the market to enter a stage characterized by gradually easing high interest rates, slowly recovering transaction volumes, and intensified price differentiation.
Initially projected by Redfin, by the end of 2026, there is a chance for 30-year fixed mortgage rates to drop below 6% to 5.9%, marking a notable shift. Additionally, it is anticipated that residential transactions in the U.S. will surpass 2025 levels.
Redfin emphasizes that two critical variables for the second half of the year are whether mortgage rates truly decrease and if the supply of existing homes continues to increase. However, even with rate decreases, the U.S. continues to face housing shortages, making a nationwide price collapse unlikely. Nevertheless, due to recent geopolitical tensions and inflation fluctuations, some analyses have adjusted rate projections to around 6.1%.
In June, Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), stated that if inventories continue to rise, home sales in the second half of the year will outperform the first half. As both buyers and sellers slowly adjust to market conditions, there is an overall improvement anticipated. Additionally, builder incentives are aiding prospective buyers in achieving their homeownership dreams.
The Mortgage Bankers Association (MBA) believes that the persistent housing shortage in the U.S. still unsolved, with high mortgage rates and property prices, which means many families cannot afford to buy a home.
Recent data from the MBA revealed that despite ongoing incentives from builders, the new home loan applications in May were dampened by high rates and economic uncertainties. This indicates that it’s not that “no one wants to buy,” but rather “many want to buy but cannot afford it.”
Summing up the current predictions from various institutions, the consensus is that the housing market is unlikely to collapse but won’t see a surge either. Maintaining current mortgage rates, transaction volumes may slightly improve compared to the first half of the year. While nationwide prices are expected to see a small increase due to eased inventory levels, first-time buyers continue to face significant pressure in a high-priced environment.
Ultimately, the direction of the housing market at the end of 2026 hinges on three external variables: Federal Reserve rate cuts, potential inflation spikes from the Middle East conflict and energy prices, and effective new housing policies to genuinely increase supply.