US Home Prices to Rise 4% in 2026 Amid Policy Shifts and Economic Factors

Modest Growth in US Home Prices Predicted for 2026

According to a recent forecast by Cotality, US home prices are expected to grow at the low end of the 4-5% historical average in 2026. This growth is anticipated amidst cautious optimism regarding potential easing in mortgage rates and increasing buyer activity in the spring season. The forecast reflects a significant shift in federal priorities, impacting various regional markets differently. RealEstateAbroad.com analysis indicates that while the market shows signs of recovery after the slowdown in 2025, inventory levels and mortgage rates will be the critical factors shaping buyer re-engagement.

Buyer Demand and Inventory Trends at the Start of 2026

As 2026 begins, the housing market is showing signs of improved momentum. Data from HousingWire reveals that weekly pending home sales reached 56,252 for the week ending January 23, marking gains both week-over-week and year-over-year. Additionally, mortgage purchase applications rose by 5% from the previous week and 18% compared to the prior year. New listings have also shown early positive trends, with 53,920 new listings last week compared to 50,946 in the same week in 2025. This data suggests a more balanced market characterized by increasing inventory and stable pricing.

Hartford Emerges as the Hottest Housing Market in 2026

Hartford, Connecticut, has been identified as the hottest housing market in the US for 2026, according to Zillow's annual ranking. This city has now overtaken Buffalo, New York, primarily due to its significant inventory deficit. Hartford's inventory is 63% below pre-pandemic levels, which is the largest deficit among the 50 largest US metros. This scarcity has driven fierce competition, with 66% of homes selling above the list price last year. The demand in Hartford is mirrored by its low share of homes with a price cut, recorded at only 16.5%.

Hartford's inventory is 63% below pre-pandemic levels, which is the largest deficit among the 50 largest US metros.

Federal Policies and Mortgage Rate Implications

The forecasted modest growth in home prices is also influenced by expectations of a slight easing in mortgage rates. Realtor.com predicts that mortgage rates will average 6.3% in 2026, which would alleviate some affordability pressures faced by buyers. Redfin's 2026 predictions, detailed in their Great Housing Reset report, suggest a normalization in the market with mortgage rates dipping into the low-6% range and home sales expected to rise by 3%.

Metric	2026 Forecast	Expected Change
Mortgage Rate	6.3%	-0.5% YoY
Home Sale Price	+2.2%	N/A
Existing Home Sales	4.13M	+1.7%

Regional Disparities and Strategic Opportunities for Investors

Investors are urged to consider regional disparities when making decisions, as markets like Hartford present unique opportunities due to their low inv

Invest in regions with historically low inventory like Hartford for high competition and quick equity gains.

entory levels. Conversely, Washington, D.C., has emerged as the second-fastest depreciating market, largely due to early digital-only government enterprise (DOGE) initiatives, which could create opportunities for value-driven investments as prices adjust.

• Invest in regions with historically low inventory like Hartford for high competition and quick equity gains.
• Explore Washington, D.C. for long-term value investments as the market adjusts.
• Monitor mortgage rates for opportunities to refinance or secure affordable financing.

Looking Forward: Implications for 2026 and Beyond

The trajectory of US home prices in 2026, set against a backdrop of shifting federal priorities and potential mortgage rate changes, suggests a year of cautious optimism. RealEstateAbroad.com advises investors to remain vigilant and agile, especially in regions showing significant market shifts. As inventory levels rise and mortgage rates stabilize, buyers are likely to re-engage, potentially driving further market normalization. Future implications will largely depend on the pace at which these factors align to create favorable conditions for both buyers and investors.