Matthew Gardner, chief economist at Gardner Economics, recently shared his insights into the 2026 real estate market, forecasting a period of increased clarity and modest growth. After several years of subdued activity, Gardner anticipates a rise in home sales driven by increasing inventory and more realistic seller expectations. He also highlighted the potential return of "fence-sitters" who have been waiting for market shifts.
Key Takeaways
- Increased Sales Volume: Expect a "decent but not huge jump" in sales compared to 2025.
- Price Normalization: While not a surge, prices are expected to see modest national growth, varying by region.
- Mortgage Rate Dip: Gardner predicts rates could fall slightly below 6% by Q4 2026.
- Affordability Challenges: Despite modest growth, affordability will remain a significant issue, particularly for first-time buyers.
- Market Clarity: The overarching theme for 2026 is "clarity," offering more certainty for buyers and sellers.
Sales Volume on the Rise
Gardner’s optimism for increased sales stems from several factors. He anticipates a rise in inventory, providing more choices for potential buyers. Crucially, he believes sellers will become more realistic about home values, leading to lower asking prices. This, combined with the return of "fence-sitters" who have been on the sidelines, is expected to boost transaction volumes. While acknowledging that the market is unlikely to return to the highs seen in 2020-2021, Gardner sees a significant improvement over the low sales figures of recent years.
Price Growth and Affordability
Contrary to fears of price acceleration, Gardner predicts a period of "price normalization" rather than a balanced market across the board. While some markets may still face affordability issues, national prices are expected to see modest growth. This growth will be influenced by factors such as increased confidence, slightly lower borrowing costs, and improving affordability in certain areas due to more realistic asking prices. Regional variations are expected, with the Midwest potentially seeing stronger gains, while the Northeast and South might experience more modest increases. Western markets, which saw declines in 2025, are predicted to turn modestly positive.
Gardner emphasized that for the market to truly normalize, incomes need to rise faster than home prices for several years. This trend is crucial for improving affordability, especially for first-time homebuyers who continue to face significant challenges.
Mortgage Rate Outlook
Gardner’s forecast for mortgage rates is more optimistic than many, predicting a dip to 5.9% by the fourth quarter of 2026. This outlook is based on the expectation that the spread between ten-year Treasury yields and mortgage rates will narrow, returning closer to historical averages. He cautioned that significantly lower rates (in the mid- to low-fives) would likely signal a severe economic contraction or recession. Conversely, he sees little reason for rates to move substantially higher, unless there’s a significant loss of confidence in U.S. debt.
A Year of Clarity
When asked to summarize the 2026 housing market in one word, Gardner chose "clarity." He believes that after the uncertainties of the COVID-19 pandemic and subsequent market fluctuations, 2026 will offer a less opaque environment. This clarity will empower both buyers and sellers to make more informed decisions, ultimately contributing to the anticipated rise in prices and transactions, albeit at a measured pace.