Predicting the fate of the real estate market in America for 2026 is probably more precarious than in recent years with prices continuing to hit record highs, mortgage costs challenging buyers and the direction of the economy uncertain.
One of the most influential factors for 2026 will be the cost of money.
How low will our mortgage costs go?
The Federal Reserve’s decision to reduce the federal cash rate to 3.75% in December has done little to ignite the market. In fact, it went through with barely a murmur even though it was the third reduction since September.
Buyers and sellers alike will be watching the cash rate guidance with increasing interest in early to mid-2026, especially given the impending change of Chair at the Federal Reserve and political pressure to make further reductions.
The two Fed Chair candidates are Kevin M. Warsh and Kevin A. Hassett, and either appointment will likely face the glare of political pressure to reduce the federal funds rate further. The President said he wants the rate to be 1%.
However, many of our institutions are taking an understandably cautious view of the next 12 months despite the fact the Fed may continue to be something of a political football.
Fannie Mae, which is a dominant force in the mortgage market, says rates are likely to fall from an average 6.35% to 5.9%. It says the US will likely see at least two more cuts in the federal funds rate guidance.
It is the most bullish of other industry commentators.
The National Association of Realtors (NAR) almost fell into line with Fannie Mae, predicting a 6% mortgage rate – a level that’s unlikely to change market sentiment in the next 12 months.
Its prediction may signal its continuing frustration with current mortgage cost trends. The NAR has consistently said that greater affordability will boost home sales.
The Mortgage Bankers Association (MBA) believes the cost of money is going to remain around 6.4%, mainly due to the prospect of wage growth and ensuing inflationary pressure.
Meanwhile, Wells Fargo and the National Association of Home Builders (NAHB) both predict mortgage rates will hover in the 6.2%-6.25% range.