Next year should mark a shift in the housing market after years of largely being frozen in place, according to Mike Simonsen, chief economist at top residential real estate brokerage Compass.
Home sales flatlined amid unaffordable conditions after rising demand collided with tepid supply growth, pushing up home prices. Would-be buyers became so discouraged that demand cooled and remains slow.
Prices are now becoming more favorable for house hunters, a trend that should continue in 2026 and change the narrative in the housing market.
“In the next era, that story flips. So sales are starting to move higher, but prices are capped or maybe down. Incomes are rising faster than prices, and so affordability improves for the first time in a bunch of years,” Simonsen told CNBC on Friday. “It’s not a dramatic improvement, but it’s the start of the new era.”
His view echoes a recent report from Redfin, which also cited stronger income and weaker homes prices as it predicted a “Great Housing Reset” in 2026.
In addition to potential buyers giving up on finding an affordable home, sellers have been giving up on finding someone willing to buy at the price they want.
As a result, the number of homes that were withdrawn from the market jumped this year. In June, these so-called delistings shot up 47% from a year earlier.
Simonsen said listing withdrawals tend to be owner-occupied homes, meaning they could be latent demand as well as supply. That’s because two transactions would be needed: owners want to buy a new home but must sell their current one.
“In an environment where conditions improve a little bit, we actually estimate that that’s a representation of shadow demand—people that want to move, people that have delayed moves for maybe four years now,” he said, adding that there are about 150,000 such homeowners.
His housing market outlook for a new era of improving affordability doesn’t depend on a steep drop in mortgage rates. In fact, a plunge might spur so much demand that prices would overheat.
Simonsen expects rates to stay in the low-6% range, allowing sales to grow while also keeping home prices in check as more inventory comes on the market.
The price environment is already showing auspicious signs for prospective buyers. More than half of U.S. homes have dropped in value over the last year, but homeowners can still sell with a net gain as values are up a median 67% since their home’s last sale, accordion to data from Zillow.
And a separate report from Zillow found that homebuyers are getting record-high discounts. While the typical individual discount remains $10,000, desperate sellers are increasingly offering multiple reductions as muted demand leaves homes on the market for longer. As a result, the cumulative price cut in October hit $25,000.
“Most homeowners have seen their home values soar over the past several years, which gives them the flexibility for a price cut or two while still walking away with a profit,” Zillow Senior Economist Kara Ng said in a statement last month. “These discounts are bringing more listings in line with buyers’ budgets, and helping fuel the most active fall housing market in three years. Patient buyers are reaping the rewards as the market continues to rebalance.”
