As the year comes to a close, the questions I hear most from clients and neighbors remain the same: How’s the market, and what lies ahead? Fortunately, the answer is beginning to crystallize.
Compass Chief Economist Mike Simonsen has released a comprehensive 2026 Housing Market Outlook, and I want to share several key takeaways from this data-driven, 66-page report. These insights are not predictions carved in stone, but a clear lens on where the housing market appears to be headed.
The report confirms that the erratic, post-pandemic housing market is concluding. After four years of pandemic-driven distortions—frozen mobility, volatile mortgage rates, and uneven inventory, 2026 is poised to be the first year when the housing market begins to normalize. The report defines this as a “new era” driven by themes of stability and balance. Neither a boom nor a bust, it’s a much-needed period of equilibrium.
Understanding the Regional Divide
Of course, real estate is hyper-local, and national reports require context. Nationally, Simonsen defines “luxury” as anything priced over $1 million—a figure that is notably, often below the cost of a one-bedroom condo in many Manhattan neighborhoods. The report also emphasizes a “K-shaped” economy, where regions and price segments move in sharply different directions. While much of the Sun Belt—especially Texas and Florida—is grappling with elevated inventory and price pressure, we in the Northeast are still operating under inventory-starved conditions. In markets like ours, well-priced properties continue to attract buyers, even during slower cycles. That distinction matters.
“For buyers, this environment offers more selection and negotiating power than at any point since the pandemic. For sellers, it demands realistic pricing from day one.”
Eight Expectations for 2026
Here are some of the most meaningful national themes—and how they translate locally:
Home prices are expected to remain largely flat, with national appreciation projected at just +0.5%. This marks a shift away from volatility rather than a signal of decline.
Mortgage rates are likely to hover in the low-to-mid 6% range, which is where we consistently see buyer activity re-engage. Nearly 20% of outstanding mortgages now carry rates above 6%, creating a growing pool of homeowners who are no longer anchored to ultra-low pandemic loans and are therefore more willing to move.
Inventory should increase gradually—by up to 10% nationally, as the "golden handcuffs” of 2% rates loosen, offering buyers more choice without overwhelming the market.
Sales volume is expected to rise modestly, as pent-up activity on both the buying and selling sides begins to unlock, and as elevated rental prices push more renters to consider ownership. Existing home sales are projected to rise approximately 5%, and if rates cooperate to 10%.
The luxury market continues to outperform. In New York especially, high-end buyers remain less rate-sensitive, often pay cash, and are benefiting from strong financial markets and AI-driven wealth creation.
First-time buyers remain under pressure. High down payments and interest rates coupled with student loan debt continue to create barriers to ownership, while rising rents make saving increasingly difficult, reinforcing a rental trap at the entry level. With more renters staying put, rental prices are likely to continue to accelerate in 2026.
Affordability should improve gradually, not through a dramatic price correction, but through an extended period of flat prices combined with household incomes rising at about 4% annually, and—hopefully—stabilizing mortgage rates.
The shadow market will re-emerge. Roughly 60% of listings were withdrawn nationally in 2025, forming “shadow inventory,” while 15–25% of mortgage applicants pulled out of transactions, representing “shadow demand.” Even a modest improvement in conditions could bring both back into next year’s market.
Strategic Plays for Buyers and Sellers
For buyers: This new era rewards preparation, patience, and decisiveness. Waiting for a major price correction may prove counterproductive. If inventory rises while prices remain flat, negotiating leverage improves—but selection will still be limited. The right opportunity will require readiness.
For sellers: As inventory gradually increases, competition will return as well. Success will depend on thoughtful preparation—from presentation and staging to realistic pricing from the outset. Today’s buyer is discerning, informed, and selective. Standing out matters.
“For buyers and sellers, a flat-price environment requires a mental shift. Buyers may be tempted to wait, expecting further declines. Sellers will need to price competitively from the start.”
The Bottom Line
New York is faring better than many other markets. We remain a tight, resilient environment, with low inventory, healthy demand, and none of the oversupply issues facing other regions of the country. As we enter the new year, there is reason for confidence—not exuberance, but clarity. We look forward to helping you navigate this new era ahead.
Wishing you and yours a happy holiday season ahead. Merry New Year! -Shirley & Casey