Home sales to jump nearly 10% in 2026, forecasters say

Fannie Mae's latest forecast predicts a significant rebound in U.S. home sales, projecting a nearly 10% increase in overall sales by the end of 2026, with existing home sales reaching an annualized rate of 4.446 million. This optimistic outlook hinges on a steady decline in 30-year mortgage rates to 5.9% by late 2026, down from 6.4% by end of 2025, and improved housing affordability driven by rising inventory and moderate price growth. This indicates a potential market inflection point for real estate and related sectors, contingent on these financial conditions materializing.

Analysis

Fannie Mae's September Economic and Housing Outlook presents a bullish case for a U.S. housing market recovery in 2026, projecting a 9.2% increase in total home sales compared to the end of 2025. This updated forecast, which is more optimistic than the 6.1% overall increase projected in February, anticipates existing home sales reaching an annualized rate of 4.446 million. The projection is underpinned by a forecast of declining 30-year mortgage rates to 6.4% by the end of 2025 and 5.9% by the end of 2026. However, this recovery is contingent upon an improvement in housing affordability, which remains a significant headwind with sales expected to hit a 30-year low by the end of 2025. Economists from First American (FAF) support the potential for a rebound, citing moderating mortgage rates, rising incomes, and slowing price growth as factors that could ease affordability constraints and support a gradual increase in sales volume from historic lows.

Key Decisions for Investors

• Investors with a long-term outlook could consider building positions in sectors sensitive to housing transaction volumes, such as homebuilders, mortgage originators like Fannie Mae (FNMA), and title insurers like First American (FAF), in anticipation of the forecasted 2026 market upswing.
• It is critical to closely monitor the trajectory of 30-year mortgage rates and monthly housing affordability indices, as the entire bull case presented by Fannie Mae is contingent on rates falling to the 5.9% target and affordability improving from current lows.
• Given that the housing market is projected to remain weak through 2025, investors should exercise caution regarding the timing of new investments, as any failure of financial conditions to ease as predicted could significantly delay or weaken the expected recovery.