According to the latest forecast from the National Association of Realtors (NAR) in the United States, the country’s existing home sales, which have been stagnant for three years, are expected to increase by approximately 14% next year; new home sales are expected to grow by 5%; and home prices are also projected to rise by 4%.
NAR’s Chief Economist Lawrence Yun believes that the growth in home sales and price increases are based on the steady job growth expected in the United States next year – creating 1.3 million job opportunities. Additionally, the shortage of housing supply in the market will support a 4% increase in home prices next year.
The average overall mortgage interest rate this year is around 6.7%, and it is expected to slightly decrease to an average of 6% next year. Yun pointed out that the decrease in mortgage rates depends not only on the Fed’s decisions but also on other economic factors. Even though the decrease is small, it will help improve homebuyers’ affordability.
Data from the real estate information website Redfin shows that the U.S. real estate market has been in a downturn in 2025 with only 28 out of every 1,000 homes changing hands in the first nine months, marking the lowest transaction rate in decades. Economists estimate a 0% growth in existing home sales this year and a 2% decrease in new home sales compared to last year.
In October, there were minor changes in housing sales and new listings compared to September and the same period last year, with prices stabilizing. However, the average selling price of homes sold in that month was 1.5% lower than the final listing price, marking the largest “October discount” since 2019.
Yun expects an overall rebound in the real estate market next year, but it won’t be balanced. Cash buyers and the baby boomer generation with substantial assets will have the upper hand as buyers.
According to the latest survey data from NAR, first-time homebuyers accounted for 21% of total buyers this year, hitting a historical low. Meanwhile, cash buyers made up 26%, reaching a new high since 2003; and as high as 30% of repeat buyers paid in cash without a loan.
Home sales in 2025 have decreased by 37.7% compared to the peak buying period during the 2021 pandemic (44 homes sold for every 1,000 homes) and decreased by 31.2% compared to 2019 before the pandemic (40 homes sold for every 1,000 homes). The low turnover rate is attributed to high home prices, high mortgage interest rates causing more buyers to adopt a wait-and-see attitude, and many sellers reluctant to give up low-interest rate mortgages obtained before the rate increase. Additionally, economic uncertainties have made some buyers more cautious.
Homes priced between $750,000 and $1 million had the highest sales volume in 2025, while lower-priced homes had limited inventories.
Yun also pointed out that mortgage applications this year have been consistently higher than the same period last year, indicating a positive trend of buyers entering the real estate market. He believes that 2026 will see a significant increase in sales volume, with no risk of decline in home prices across the U.S.
The general consensus among industry experts is that home prices will rise next year.
Steven Glick, Director of Mortgage Sales at the real estate investment platform Ziffy, told CBS that every 0.25 percentage point decrease in mortgage interest rates will impact monthly payments and buyer qualifications. The Federal Reserve has hinted at further interest rate easing, which will moderately boost demand for real estate.
Experts also note that a stable job market next year will encourage more people to buy homes, leading to improved demand and resulting price increases. Additionally, rising housing construction costs will also drive up home prices.
Compared to the rest of the U.S., California residents face lower housing affordability due to high home prices. According to Redfin data, in the first nine months of this year, six out of the seven cities with the lowest housing turnover rates in the U.S. were in California.
Los Angeles had only 11.5 homes changing hands for every 1,000 homes, with a new homeowner rate of 1.15%, ranking as the second lowest in the U.S. after New York’s 1.03%. The national average was 2.77%, marking the lowest turnover rate in nearly thirty years.
The Redfin report suggests that California’s low housing turnover rates are related to Proposition 13.
Enacted by voters in 1978, this law bases property tax on the 1976 valuation, capping property tax at 1% of the valuation and limiting annual tax increases to 2% unless the property changes ownership or is rebuilt. Revaluation is not allowed unless the property owner makes changes or upgrades.
With property prices skyrocketing many times over the original valuation under this law, property taxes also increased significantly, restricting homeowners’ willingness to sell. This has made the baby boomer generation, who own homes, the key players in today’s real estate market.