As the new year begins, so do the predictions for the 2026 housing market. Here’s what the industry is saying:
Interest and Insurance
NAHB CEO Jim Tobin doesn’t expect significant relief on borrowing costs anytime soon, noting that mortgage rates are unlikely to dip consistently below 6% through much of 2026 and into 2027.
Inflation trends are moving in the right direction as shelter inflation rose just 3.0% year-over-year, the slowest increase in more than four years.
On the other hand, home insurance costs jumped another 7%, compounding already-elevated increases from recent years.
Sales Outlook: Momentum Returns
Lawrence Yun, Chief Economist at the National Association of REALTORS®, is forecasting a 14% increase in nationwide home sales in 2026 and new-home sales are expected to rise another 5%. Importantly, Yun sees growth without a price correction: “Home prices nationwide are in no danger of declining.” NAR projects homes prices to rise about 4% in 2026.
Construction Starts: A Pullback Continues
Despite stronger sales expectations, 2026 could be the slowest year for single-family starts since 2019. With a large inventory of completed and under-construction homes, builders are expected to limit new starts and rely on incentives—especially mortgage rate buydowns—to move inventory in affordability-strained markets.
Local Lens: Alabama Remains Well-Positioned
Across Alabama’s major markets, home values continued to rise at a healthy pace in 2025, and that momentum is expected to carry into 2026, with moderate appreciation of 4–7%.
Economist Dr. Evan Moore points to improving inventory as a key shift: “The housing market will be more balanced in 2026, as supply is increasing and there will likely be 5–6 months of supply available for much of the year.” Moore cautions that new construction faces continued headwinds as well: “The supply of new homes will continue to face hurdles, such as higher material costs due to tariffs, potential labor scarcity stemming from immigration policy, and first-time buyers having difficulty with down payments.”
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