Logan Mohtashami’s 2026 housing forecast

2026 is upon us and for this year, I want to keep the housing discussion very simple. As active inventory has returned to near-normal levels and home-price growth has cooled, we are entering a year when buyers, sellers and buyers-to-be are on a much better footing than in the unhealthy housing markets of 2020 to early 2022.

Keeping it simple: housing data tends to improve when mortgage rates fall below 6.64% and head toward 6%, and then data tends to fade when mortgage rates are above 6.64% —especially when rates are over 7%. Home prices aren’t growing out of control anymore, and we have ample supply, so just like the last few years, let the slow dance of the 10-year yield guide you to where housing is going all year long.

A short recap of the 2025 forecast

In 2025, my forecast was for the 10-year yield to range between 3.80% and 4.70%, and mortgage rates to range between 5.75% and 7.25%. The actual numbers ended up being really close to that. The 10-year yield ranged between 3.87% and 4.79%, if I account for overnight trading, and mortgage rates ranged between 6.13% and 7.26%.

The reason mortgage rates are near yearly lows as we end the year is that the labor market has softened and mortgage spreads have returned to near-normal levels. Without these two variables, mortgage rates would have stayed higher for longer.

The 2026 forecast

My 2026 forecast is for the 10-year yield to range between 3.80% and 4.60%, and for mortgage rates to range from 5.75% to 6.75%.

It’s tough for me to forecast mortgage rates below 5.75% with the Federal Reserve in a neutral policy stance; if mortgage spreads were normal, we would be there today. As I have often talked about, we have had a slow dance between the 10-year yield and 30-year mortgage rate for decades and Fed policy really moves 65%-75% of this.

If the bond market really fears a recession — as it did in 2023 and 2024 — then the 10-year yield can easily break below 3.80%. Unlike those years, the 10-year yield didn’t break under 3.80% in 2025, even with Godzilla tariffs and the fears that those would usher in a recession.

What would drive rates to the higher end of my forecast range of 4.60%? If labor data improves. If we created 100,000-plus jobs and the unemployment rate was lower, yields and rates would have been higher in 2025.

For 2026, due to Fed policy and better mortgage spreads, I am able to shave 0.50% off the top end of 2025’s forecast range for mortgage rates. However, if the economy grows faster and labor data improve, rates can rise from current levels.

Mortgage spreads

Mortgage spreads have been a confusing topic because many people simply don’t know what the term means. The spread is the difference between the 10-year yield and the 30-year mortgage rate. In 2023, that difference reached 3.10%, and the normal range in recent history has been between 1.60% and 1.80%. The forecast for 2024 and 2025 was for an improvement in spreads, and, as you can see in the chart below, we did see that improvement.

The forecast for spreads in 2025 was a 0.27%-0.41% improvement based on a 2.54% average in 2024, and we ended the year at 2.05%. Mortgage spreads should return to the 1.80% spread level in 2026, providing more cushion for rates to stay lower for longer.

Existing home sales

I always encourage people to follow our weekly Housing Market Tracker articles, as they have done a good job of showing changes in the housing story, including which rate levels impact the demand curve, both positively and negatively. What I have seen and talked about for some time now is that housing data tends to improve when mortgage rates fall below 6.64% and head toward 6%.

Keeping it simple, if mortgage rates can stay below 6.25%, we can get an additional 237,000 existing home sales in 2026. The lower the rates go, the more home sales we will have. Of course, this means that if rates rise above 6.64%, sales would fall slightly, as they have in recent years.

Home prices

In 2024, my home-price forecast was for 2.33% growth, which turned out to be wrong, as lower rates pushed home prices higher that year, ending 2024 at 4% growth. I always use the S&P Cotality Case-Shiller price index as my pricing metric. In 2025, my forecast was for 1.77% home-price growth and we will end up around there. I always care more about showing our weekly tracker data tied to a forecast, because most forecasts are never 100% correct, but what really matters is the flow of data throughout the year.

With that said, both 2024 and 2025 forecasts were for real home prices to fall, a pattern seen throughout history in affordability-constrained markets. Outside 2007-2011, since 1942, we’ve never had a year in which nominal prices fell by 1%. 1990 prices were down 0.7%, and 1991 prices were down 0.2%. For 2026, I expect the inventory growth trend to continue, with rates staying elevated and home prices down 0.62%.

I am not 100% in the camp that mortgage rates can go lower in a big way in 2026, and given the slope of our inventory data, if rates rise toward the upper range again, pricing can be soft again.

Now, when mortgage rates get closer to 6%, the pricing data improves, as we saw late in 2025. When they go above 6.64%, it gets weaker. All this is very healthy, and the best way to address affordability is through supply. Every year that goes by with wages growing faster than home prices is a good year for America.

My rule of thumb has always been that when active inventory is above 1.52 million, and we have over 4 months’ supply, it’s no longer an inventory shortage; both of those happened in 2025. As part of the weekend tracker, we will see how rates, inventory, new listings and price cut percentage all work together in the new year.

The X factor: Trump’s housing policy

Between proposals to replace Fed Chair Jerome Powell, going after regional Fed governors, 50-year mortgages, portable mortgages, the Freddie and Fannie IPO, the national housing emergency plan, and a capital gain exemption up to $1 million, 2026 has the potential for the most significant housing policy moves by a sitting President in recent history.

With that said, I don’t take any of the political proposals seriously in my economic work until I see a law or policy actually changed; then I can deal with it. Also, I believe that if Trump elects one of the people close to him as the next Fed chair and the bond market goes against him as a result, I think that person, either Kevin Warsh or Kevin Hassett, will resign, as Trump doesn’t have a lot of time to deal with the bond market throwing a tantrum.

My best advice is to follow our weekend tracker and listen to the HousingWire Daily podcast for what is really happening in housing, not what could happen. Speculating on political economic outcomes isn’t useful until something happens.

Conclusion

We will know a lot about the 2026 housing market in the first few months of the year and our Housing Economic Summit on Feb. 10 is great timing. Hopefully, our new listings data returns to normal in 2026, ranging between 80,000 and 100,000 listings per week during the seasonal peak months. We haven’t seen that happen in years. During the housing bubble, new listings ranged between 250,000 and 400,000 per week. We don’t see stressed sellers in the markets yet; if it ever happens, we will pick it up first in this data line.

It will be interesting to see how inventory reacts if rates stay lower for longer in 2026. Demand does get a tad better with rates near 6%, but that won’t push pricing aggressively higher, given that active inventory is now up from the lows we saw in early 2022.

If we go higher in rates, housing will slow and pricing will be negative in some parts of the U.S. more than in others. I will be curious to see how inventory grows in 2026. When mortgage rates headed toward 6% in 2025, our inventory growth rate data fell from 33% to 13.06% year over year. So it will be interesting to me in 2026 how home sellers react to rates being near 6% to start the year.

As always with my work, a forecast is useless without a tracker model each week or month to explain where things are heading, because if there is one thing the last three years have shown, it’s that housing can shift quickly and our data will be first to pick it up. My job is to teach how this all works and the weekly tracker will be back up on Jan. 10. Happy New Year!

Logan Mohtashami is a keynote speaker at HousingWire’s Housing Economic Summit on Feb. 10. Find more information here.