Where the growth may come in 2026

Despite a year of murky government data, the signals for 2026 are clear: Steady economic growth, rising incomes and shifting housing dynamics will shape the market. For buyers and sellers, the big picture matters: Consumer spending remains strong, affordability pressures persist, job mobility is slowing and migration patterns continue to reshape demand. These forces will define not only the pace of home sales, but also where and how Americans choose to live in the year ahead.

Here's a look at where real estate may be headed in 2026:

The economy is likely to continue growing at a moderate pace. Measurements of the country’s Gross Domestic Product — a broad metric of the value of all economic activity in the nation — have been volatile recently, partly due to abrupt changes in the federal government's economic policies. The U.S. economy grew really fast in the third quarter of 2025 — much faster than prices were rising. But the fourth quarter numbers are expected to show a slowdown, partly because the government was shut down for a while.

Looking at the bigger picture, the economy has been growing at a steady pace — about 2.5% per year — since 2012. Experts think 2026 will be similar, with the economy continuing to grow at that same rate.

What’s driving this growth? Mostly, it’s people spending money on things they want and need and businesses investing in new projects. That’s good news for buyers and sellers, because a strong economy usually means more jobs, higher incomes and more people looking to buy homes.

People are expected to keep spending money in 2026 because their paychecks are getting bigger, and they’re keeping more of what they earn after taxes. Over the decade, prices have gone up by 3.2% a year, but wages have grown even faster — by 3.9% annually. That means most workers have come out ahead, even after paying higher prices for things.

In the past three years, this gap has been even wider: Wages kept growing at 3.9% a year, while inflation has been only about 2.9%. The forecasting firm Oxford Economics predicts that in 2026, wage growth will continue to outpace inflation. Even the quartile of workers with the lowest earnings saw their wage growth surpass the inflation rate, and only 13.5% of workers reported no increase in hourly earnings over the previous 12 months, according to the Federal Reserve Bank of Atlanta's Wage Growth Tracker.

For most adults, earnings comprise the large majority of their income and their spending power, but a better measure of consumers’ overall income growth is their disposable personal income — or their take-home pay, the money they have left after paying their taxes. Disposable personal income has grown significantly more than inflation, at 5.7% per year over the past three years. As with earnings, Oxford Economics forecasts that growth in disposable personal income will continue to outpace inflation in 2026.

This growth in earnings and disposable income is likely to drive consumer spending next year. It has grown by 5.4% annually for the past three years. This means households have not simply spent more; they have been able to purchase more goods and services, even after accounting for higher prices.

What’s more, personal debt payment requirements are currently quite low. They are at levels not seen since the 1980s and 1990s mostly because people have paid down their debt. According to Federal Reserve data, as of the third quarter of 2025, total household debt service amounted to 11.2% of household income.

While consumer spending will likely provide the critical foundation of continued growth in the national economy, business investment is expected to provide a firm second pillar. In fact, Oxford Economics forecasts that spending on items such as software, machinery and buildings (including housing) will grow by 3.5% in 2026. In short, although there are always risks to these forecasts, expectations are favorable.

Despite the general health of the overall economy, many consumers feel stressed about affordability and the rising cost of living. Among the most significant sources of stress is the price of housing, which surged during the COVID recession and has not eased meaningfully since then (except in scattered markets that saw substantial new construction). For example, the Federal Reserve Bank of Atlanta publishes a Home Ownership Affordability Monitor that estimates the percentage of the median household income that would be devoted to mortgage payments for a newly purchased median-priced home. At the beginning of 2020 — that is, just before the pandemic—the Atlanta Fed estimated the payment/income ratio at about 28%, but from 2021 through mid-2023, it surged to about 43%. It has remained generally in the range of 42.5% to 45% since then.

Oxford Economics forecasts that house prices nationwide will increase by another 1.9% in 2026. (That is low by historical standards. Generally, the rate of increase in house prices has exceeded inflation, and since the beginning of the COVID disruption, they have risen by an astounding average of 8% per year.) Moreover, as noted, we expect earnings and disposable incomes to grow more rapidly than inflation in 2026, which means that home affordability is likely to improve — at least slightly.

The continued strength of the economy, however, makes it unlikely that interest rates, including mortgage interest rates, will come down substantially in 2026. We're probably not going to see rates under 4% that made homebuying so much more affordable in 2020 and 2021. Housing affordability is likely to continue to stress households, even if income growth outpaces inflation and house price growth and mortgage interest rates decline somewhat.

The challenge of affording a home isn’t the same everywhere in the country. In different cities, home prices can vary a lot more than household incomes. This means that whether a home is affordable mostly depends on how expensive houses are in that area — not so much on how much people earn. Because of this, many families may be able to move to a different city where homes cost less without having to take a big pay cut.

House prices tend to be much higher, relative to incomes, in specific parts of the country, particularly in cities on the West Coast (such as Los Angeles, San Diego, San Jose and San Francisco) and in the mountain states (such as Salt Lake City, Utah; Las Vegas, Nevada, and Denver and Colorado Springs, Colorado). In markets such as these, the median house value is typically more than five times the median income of a household of prime homebuying age (25- to 44 years old), making the purchase of a property extraordinarily difficult and affordability stress exceptionally high.

In contrast, the ratio tends to be much lower in parts of the country between the Rocky and Appalachian Mountains, including Pittsburgh, Pennsylvania; Rochester and Buffalo, New York; Cleveland, Ohio, and Saint Louis, Missouri. In markets such as these, the median house value is typically less than 3.5 times the median income of households in the prime homebuying age group, which significantly reduces affordability stress.

The housing market in 2025 has shown some of the expected effects of such significant differences in affordability. For example, migration data suggests that households are increasingly moving away from some of the least affordable cities, while data on completed home sales from Homes.com, the residential real estate affiliate of CoStar, indicates that demand has been strongest in some of the most affordable markets, with median sale prices rising from November 2024 to November 2025 by 11.6% in Cleveland, 10% in Cincinnati, 8.7% in Pittsburgh, 7.5% in Saint Louis, 5.0% in San Antonio and 5.0% in Kansas City.

For a working-age household, moving from one city to another to take advantage of lower housing prices may require getting a new job. Thus, the continued health of the job market is critically important to enable people to make the decisions that will increase their standard of living.

Although late 2025 brought some signs of weakness in the labor market, we generally expect conditions to remain stable in 2026. The unemployment rate increased to 4.6% in November 2025. Still, Oxford Economics expects it to return to about 4.3% by the end of 2026, thanks in large part to the creation of 453,000 jobs. At the same time, the amount of labor turnover — workers leaving a job or taking a new job for any reason — has been declining steadily for the past four years.

In short, while the labor market has not deteriorated significantly in four years, the number of people who have left one job to take another has declined noticeably.

We expect this pattern to persist in 2026: Fewer workers are likely to switch jobs. The underlying reasons may be good (fewer layoffs and greater job security) or bad (fewer hires and increased difficulty finding a new job).

In either case, however, that decline in labor turnover itself has both positive and negative implications for the homes market.

First, it implies that there will be fewer opportunities for workers to move to a different city to take advantage of differences in housing affordability. Second, it means that the cost of staying put will be lower, perhaps giving some workers — especially those in more affordable markets — more reason to commit to homeownership.

Over the past 35 years, a steady migration of jobs and households has occurred from cities in the Northeast and Midwest regions of the country to those in the Sun Belt. Total employment has increased by more than 3% per year from 1990 to 2025, for example, in Austin, Texas; Las Vegas, Nevada, and Boise City, Idaho, and by more than 2.25% per year in seven other large metropolitan areas. In contrast, job growth over the same period averaged less than 0.25% per year in 11 large metropolitan areas and was negative in Detroit, Michigan; Hartford, Connecticut; New Orleans, Louisiana, and Dayton, Ohio.

With job turnover likely to be much slower nationwide in 2026, the overall pattern of job migration is unlikely to reverse — the Sun Belt metropolitan areas that saw the most growth from 1990 to 2025 are likely to continue leading the nation — but is expected to slow dramatically. Oxford Economics forecasts, for example, that Las Vegas will see just 0.5% job growth in 2026, or 2.7% less than the average pace over the past 35 years. In contrast, 11 larger markets that saw negative average job growth from 1990 to 2025 are expected to grow again in 2026: Washington, D.C.; Norfolk, Virginia; Akron, Ohio; Greensboro, North Carolina; Saint Louis, Missouri; Chicago, Illinois; Milwaukee, Wisconsin; Pittsburgh, Pennsylvania; Cleveland, Ohio; Rochester, New York, and Bridgeport, Connecticut.

Just as jobs have migrated to the Sun Belt over the past 35 years, they have also shifted toward specific sectors of the economy. For example, four sectors saw job growth averaging 2.5% or more per year from 1990 to 2025: health care and social assistance; educational services; professional, scientific and technical services, and arts, entertainment and recreation. In contrast, employment in three sectors declined over the same period: federal government, mining and manufacturing.

This isn't likely to change, but Oxford Economics expects to see job growth rebound in the manufacturing sector by 41,000 jobs.

The fact that the health care sector is likely to continue leading job growth, with 231,000 new positions expected in 2026, implies increased demand for employee housing not only near hospitals and clinics, but also by assisted-living and independent-living homes where older Americans are increasingly likely to seek routine medical and non-medical care.

This shift is part of the reason why non-Sun Belt markets are more likely to see job growth in 2026 than during most of the previous 35 years. Whereas older Americans from those metropolitan areas were more likely to move to the Sun Belt in earlier decades, an increasing number of them seem interested in remaining in their communities instead.

Similarly, a rebound in the manufacturing sector is likely to boost demand for housing in some non-Sun belt markets.

The COVID pandemic, shutdown and recession wreaked havoc on real estate markets throughout the country. A sudden increase in the number of workers who preferred, and were allowed, to work from home led to an equally sudden increase in demand for housing in Sun Belt markets and in more distant suburban locations.

The normal lag in production of new housing to fit these shifts in demand caused sudden increases in costs for both owner-occupied and rental housing, especially after the government’s anti-recession measures put more disposable personal income into the hands of most consumers. In turn, the sudden increase in housing costs encouraged a rise in “opportunistic” home sellers — those who offered their homes for sale not because they wanted to move, but simply in case they could attract a high enough offer.

The past year has seen some signs of a return to normalcy in real estate markets, and 2026 is likely to continue that welcome trend. House prices have continued to increase, but only moderately — and a decline in mortgage rates since early 2025, coupled with continued income growth, has made homebuying moderately more affordable.

The inventory of homes available for purchase has increased considerably, offering prospective buyers a wider selection and a better opportunity to purchase at a reasonable price. More important, the broader economy is poised to continue its moderate growth, with consumers still stressed by inflation but still employed and still with low debt.

Overall, the signs are there for a healthy real estate market in 2026.