The housing squeeze: Affordability remains out of reach

For 2026, expect lower mortgage rates but a still-tough housing market.

Why it matters: Homes remain unaffordable for many, especially younger people.

• Here's what industry economists predict:

Rates will stay above 6%

🏠 U.S. mortgage rates are expected to hover near 6.3% in 2026, according to Realtor.com chief economist Danielle Hale.

• Redfin also projects 30-year fixed rates to average 6.3%, dipping from 6.6% in 2025 while staying well above pandemic-era levels.

What we're hearing: "A lot of the challenges that the housing market has been grappling with — the lack of affordability and the 'lock-in effect' on existing homeowners — are still going to be present ... but the grip is kind of loosening," Hale tells Axios.

The big picture: Cheaper monthly payments could lift home sales, even if they won't move the needle for every buyer as economic uncertainty and other costs loom large.

Also offering shoppers some relief: Wages are expected to grow faster than home prices, which will increase another 1% in 2026, per Redfin's forecast.

🏠 More roommates, fewer babies

High housing costs may be reshaping U.S. households.

• Think: More adult children living with their parents (and vice versa), smaller families and more friends buying homes together, "often with prenup-style agreements," per Redfin researchers.

Between the lines: "Entry-level inventory remains tight, limiting options for first-time buyers," says Selma Hepp, chief economist at Cotality, an industry data provider.

What we're watching: "Renovations that create space for multiple generations are becoming increasingly common" — from garage conversions to separate suites for adult kids or aging parents," Redfin chief economist Daryl Fairweather tells Axios.

🏠 Tale of two markets persists

The housing market's regional divide isn't disappearing.

Catch up quick: Home prices are rising faster in the Northeast and Midwest, where there's less newly built housing.

• In the South and West, they're softening as pandemic-era migration slows and insurance costs climb.

The latest: Northeastern and Midwestern metros dominate Realtor.com's annual ranking of the top housing markets. That's a big shift from a year ago, when the top 10 were exclusively in the South and West.

The bottom line: Prices will likely increase 3% to 4% in the Northeast and Midwest this year, "supported by tight inventory and strong labor markets," Hepp tells Axios.

• In the Sunbelt and West, prices are expected to cool further but remain above pre-pandemic levels.