Despite a challenging period marked by 30-year low sales over the past two years, the U.S. housing market is projected to see an increase in sales activity in the coming years. Experts anticipate a modest rise in existing home sales this year, followed by more substantial growth in 2026.

Projected Sales Growth

Existing home sales are forecasted to increase by 6% in 2025 and an additional 11% in 2026. Similarly, new home sales are expected to grow by 10% this year and 5% next year. These projections come from the National Association of Realtors' chief economist, highlighting a potential recovery from the recent period of subdued activity.

Impact of Mortgage Rates and Federal Reserve Policy

The prolonged difficulty in the housing market, characterized by sales at 30-year lows, is largely attributed to elevated mortgage rates. High monthly payments have acted as a barrier for many potential buyers. Mortgage rates are seen as a critical factor for market recovery, with a forecast for them to average 6.4% over the remainder of 2025 and further decline to 6.1% in 2026. This anticipated reduction in rates is linked to expectations that the Federal Reserve will eventually cut interest rates once inflation is brought under control. The Federal Reserve recently revised its forecast for gross domestic product growth and indicated a slight increase in expected inflation, suggesting a more prolonged pause before rate cuts.

Inflation and Underlying Economic Factors

While shelter costs have been a significant contributor to inflation, this component is now showing signs of trending downward from its recent peak. This trend, coupled with robust job growth exceeding pre-pandemic levels and wage growth of 3.8% (outpacing the consumer price index of 2.3%), contributes to a more optimistic outlook. Evidence of increasing mortgage applications to buy a home, along with a strong desire for homeownership among renters, further supports the expectation of a market rebound.

Home Price Appreciation

In addition to sales growth, the median home price is also projected to continue its ascent. Experts predict a 3% increase in median home prices this year, followed by a 4% rise in 2026. This sustained appreciation, combined with anticipated sales growth, paints a picture of gradual but consistent market improvement.

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