A lack of affordability kept many would-be homebuyers sidelined in recent years. However, the tide may be turning in 2026, and all that pent-up demand could turn into heightened real estate activity.

With interest rates following a downward trajectory and home price growth slowing, the average monthly mortgage payment fell 8.4% annually this January, according to Zillow.

"We're starting 2026 following three years that saw transactions bouncing along the bottom and affordability as a chronic struggle," said Mischa Fisher, chief economist at Zillow. "Our forecast for both sales and affordability this year is one of gradual improvement. January was a cautious first step along that path, as potential buyers and sellers dealt with severe winter weather in many major markets. We expect sales to pick up as spring approaches.”

The Pace of Home Price Growth Descends

After rock-bottom mortgage rates created frenzied competition and drove home price growth to all-time highs, the pace greatly decelerated, especially in the last year. 

The typical U.S. property value declined monthly for the sixth straight time in January, reaching a price of $358,968. That dipped 0.4% from December while inching up 0.2% year-over-year, according to the Zillow Home Value Index (ZVHI). 

Of the 50 largest metropolitan areas, 20 had lower prices compared to the country overall, 16 came below the monthly growth rate, while 25 experienced negative annual value changes.

Pittsburgh topped the list with the lowest typical price of $218,792 — beating out $237,811 in Cleveland and $238,977 in Memphis, TN. Perhaps unsurprisingly, California houses the costliest markets with $1.56 million in San Jose, $1.09 million in San Francisco and $946,065 in Los Angeles. 

By month-over-month price change, Buffalo, NY decreased most at 0.9%. Pittsburgh and Austin, TX, tied for second with 0.7% declines from December 2025. Only a pair of cities saw monthly price growth: 0.2% in New York and 0.1% in Los Angeles. 

Austin property values fell furthest from January 2025, dropping 5.9%. The South Florida locales of Tampa and Miami came next, with respective reductions of 4.8% and 4.3%. Annual values increased most in Hartford, CT (4.9%), Milwaukee (4.8%) and Cleveland (4.2%).

Additionally, inventory rose 6% annually in January, but 29 metro areas eclipsed that mark. Raleigh, NC, led the nation with a 29.5% spike, followed by 21.8% in Washington, D.C., and 20.1% in Louisville, KY. On the other end, for-sale supply in San Francisco fell by 6.3%, in Jacksonville, FL, by 5.7% and Chicago by 5%.

More for-sale listings usually help homebuyers. Increased options can keep competition manageable and, in turn, property prices in check. 

Downtrending Mortgage Rates

Consensus among industry experts projected a gradual descent for interest rates over the course of 2026. 

The year’s early downtrend already beat most expectations, as the average 30-year fixed rate dropped to 5.98% on Feb. 26, according to Freddie Mac — the lowest point since Sept. 2022. The 30-year fixed rate averaged 6.6% in 2025 and 6.72% in 2024.

Rates falling below 6% marks a genuine inflection point for buyers who've been waiting out the market for two or three years — but timing still matters. Those who move quickly enough to get pre-approved stand to benefit most before rates climb back up.

For homeowners who purchased at 7% or higher, the math is worth revisiting. Even a single percentage point improvement on a $400,000 loan can translate to hundreds of dollars in monthly savings — a conversation worth having with a loan officer sooner rather than later.

If mortgage rates continue moving generally downward, it could help both home purchasing and refinancing affordability. Although, lower rates do tend to stoke demand and could raise prices depending on the inventory and potential buyers in your market. 

Mortgage rates depend on many factors, subjecting them to high volatility. That means they could change direction any given week, or even from day to day. Many professionals advise that the best time to buy a home is when you can comfortably afford it and not wait for rates to hit a certain level.

What to Expect in This Homebuying Environment

With affordability improving behind cooling prices and lower interest rates, homebuying activity is anticipated to rebound in 2026 compared to the quieter past few years.

Zillow’s February housing report estimates a 3.9% annual increase in existing home sales this year. Meanwhile, the National Association of Realtors (NAR) projects a 14% jump. While forecasts differ, it's reasonable to expect heightened demand overall.

“The desire to enter the market has already turned higher, which signals more inventory, lower mortgage rates, more transactions…“I think you are looking at a very solid year,” said Lawrence Yun, chief economist at NAR. “When the housing market begins to recover after a downturn, getting a double-digit percentage recovery is quite common.”

Factors have aligned that usually lead to increased homebuying. Though the pendulum swings back toward more balance from the strong seller’s market of the recent past, conditions vary by location. Finding a local lender you trust can help advise you on who has the upper hand in your area and how you can boost your homebuyer profile.