Housing Market Enters New Era with Improved Affordability
The housing market is poised for a transformation in the coming year, according to insights from Mike Simonsen, chief economist at Compass. After a prolonged period of stagnation, factors are aligning to enhance home affordability.
A Shift Towards Improved Affordability in the Housing Market
For years, the housing market has experienced flatlined sales due to a combination of high demand and limited supply. This has resulted in rising home prices, discouraging many potential buyers. However, recent trends indicate that prices are becoming more favorable, suggesting a significant shift in the market landscape heading into 2026.
Positive Trends for Home Buyers
Simonsen asserts that a new era is beginning, characterized by an uptick in home sales despite stable or potentially declining prices. As incomes rise faster than housing costs, affordability appears to be improving for the first time in several years. He described this development as a “start of the new era.”
- Incomes are increasing, enhancing homebuyer affordability.
- Sales are expected to rise while home prices remain stable or decrease.
- A projected “Great Housing Reset” in 2026 is anticipated.
Market Withdrawals and Shadow Demand
The number of homes withdrawn from the market has surged, with a 47% increase in delistings compared to the previous year. Many of these withdrawals involve owner-occupied residences, suggesting latent demand.
Simonsen estimated approximately 150,000 homeowners are looking to move but are held back by the need to sell their current homes first. He noted that an improvement in market conditions could spark a release of this shadow demand.
Mortgage Rates and Inventory Expansion
Simonsen’s outlook on the housing market’s shift does not rely on a drastic decrease in mortgage rates. He anticipates rates will remain in the low-6% range. This stability should allow sales to increase while helping to manage home prices as more properties become available.
Market Analysis and Buyer Discounts
Current conditions show promising signs for prospective homebuyers. Despite more than half of U.S. homes experiencing value declines over the past year, homeowners are still benefiting from substantial appreciation. The median home value has increased by 67% since the last sale, according to Zillow.
- The typical individual discount for homebuyers stands at $10,000.
- The cumulative price cut reached $25,000 in October.
Expert Insights
Zillow’s Senior Economist, Kara Ng, highlighted that many homeowners have seen significant value increases, allowing flexibility in pricing. The ongoing discounts are aligning listings with buyer budgets, contributing to the most active fall housing market in three years. As a result, patient buyers are likely to benefit as the market continues to rebalance.
