Yet another economist expects to see a kind of reset in the housing market next year, with wages growing faster than home prices, mortgage rates staying stubbornly above 6 percent and a slight improvement in the number of homes sold in 2026.
But there are several key variables that could shift things for better or worse, according to Compass Chief Economist Mike Simonsen, who released a comprehensive analysis of where he expects the real estate market to go next year.
The takeaway: Compass expects home sales to climb by just under 4 percent next year, to about 4.25 million existing home sales. Home prices nationally will tick up just 0.1 percent, with some markets falling and others rising. Mortgage rates will average about 6.4 percent for the year.
There are macroeconomic and regional variables that could influence where each market goes in 2026, according to Simonsen.
As agents look for signals in their markets early next year, Simonsen points them to three key data points: new listings, weekly ending home sales and the hiring rate.
Mike Simonsen | Compass Chief Economist
“If the new listings [are] climbing while demand is weak, that is sellers selling into that environment, and therefore that would have bearish price implications,” Simonsen told Inman this week.
“Data point No. 2 I like to watch is the weekly ending home sales,” he added. “They keep coming in a little bit ahead of last year. And so we can see those nationally.”
“And then the third one is not a housing data, it’s an economic data and that’s the hires rate. Do we start hiring?” Simonsen said. “If companies and the country start hiring and creating jobs, then the job-hugging can relax a little bit and that will free up more transactions.”
Federal Reserve Chairman Jerome Powell on Wednesday expressed doubt in the government’s recent jobs numbers and suggested that the U.S. could be losing as many as 20,000 jobs each month.
The unemployment rate is currently sitting at 4.4 percent nationally. If that rises, it could pull mortgage rates down. But if the hires rate continues falling, it could indicate continued economic anxiety among would-be movers. If it rises, mortgage rates might also climb.
“If you just look at unemployment, it’s a low rate,” Simonsen said. “It’s the hiring rate out of that that’s really interesting.”
For those with jobs, Simonsen is the latest economist to predict wages that rise much faster than home prices, giving homebuyers slightly better affordability than in recent years.
“The big trends are: affordability improves because for the first time, we’re entering this new era,” Simonsen said. “The old era was very few sales and prices staying stubbornly high. The affordability is out of reach. But in the new era, inventory is now sufficiently high that we get increasing home sales and incomes rise faster than prices.”
Simonsen said he expects inventory to climb by about 10 percent next year. Part of that increase is from a withdrawal rate that was much higher this year than last, with would-be sellers pulling homes off the market after not getting offers or the price they hoped for.
Those withdrawals often equal two transactions, as investors typically aren’t pulling houses off the market, whereas owner-occupied sellers are often looking for their next purchase.
“Those are people that want to move,” Simonsen said. “So we look at about 150,000 of those [sell-buy transactions] that are waiting to happen for slightly better conditions.”
