Homebuyers may experience a reprieve in 2026 as price normalization and an increase in home sales over the next year will take some pressure off the market—but don’t expect homebuying to be affordable in the short run for Gen Z and young families.
The “Great Housing Reset” will start next year, with income growth outpacing home-price growth for a prolonged period for the first time since the Great Recession era, according to a Redfin report released this week.
The residential real estate brokerage sees mortgage rates in the low 6% range, down from the 2025 average of 6.6%; a median home sales price increase of just 1%, down from 2% this year; and monthly housing payments growth that will lag behind wage growth, which will remain steady at 4%.
These trends toward increased affordability will likely bring back some house hunters to the market, but many Gen Zers and young families will opt for nontraditional living situations, according to the report.
More adult children will be living with their parents, as households continue to shift further away from a nuclear family structure, Redfin predicted.
“Picture a garage that’s converted into a second primary suite for adult children moving back in with their parents,” the report’s authors wrote. “Redfin agents in places like Los Angeles and Nashville say more homeowners are planning to tailor their homes to share with extended family.”
Gen Z and millennial homeownership rates plateaued last year, with no improvement expected. Just over one-quarter of Gen Zers owned their home in 2024, while the rate for millennial owners was 54.9% in the same year.
Meanwhile, about 6% of Americans who struggled to afford housing as of mid-2025 moved back in with their parents, while another 6% moved in with roommates. Both trends are expected to increase in 2026, according to the report.
Obstacles to home affordability
Despite factors that could increase affordability for prospective homebuyers, C. Scott Schwefel, a real estate attorney at Shipman, Shaiken & Schwefel, told Fortune that income growth and home-price growth are just a few keys to sustainable homeownership.
An improved income-to-price ratio is welcome, but unless tax bills stabilize, many households may not experience a net relief, Schwefel said.
“Prospective buyers need to recognize that affordability is not just price versus income…it’s price, mortgage rate, and the annual bill for living in a place—and that bill includes property taxes,” he added.
In November, voters—especially young ones—showed lowering housing costs is their priority, the report said. But they also face high sale prices and mortgage rates, inflated insurance premiums, and potential hikes in utility costs because of a data center construction boom that’s driving up energy bills. The report’s authors expect there to be a bipartisan push to help remedy the housing affordability crisis.
Still, an affordable housing market for first-time homebuyers and young families still may be far away.
“The U.S. housing market should be considered moving from frozen to thawing,” Sergio Altomare, CEO of Hearthfire Holdings, a real estate private equity and development company, told Fortune.
“Prices aren’t surging, but they’re no longer falling,” he added. “We are beginning to unlock some activity that’s been trapped for a couple of years.”