A Clear-Eyed Look at Housing, Rates, and Real Estate Returns Heading Into 2026
- Rich Arzaga
- 3 days ago
- 4 min read
Updated: 2 days ago
A data-driven analysis of the U.S. housing market, mortgage rates, and residential real estate investment performance based on National Association of REALTORS® economic research.
by Rich Arzaga, CFP®, CCIM, The Real Estate Whisperer® Financial Planning
Most #realestate investors feel like the market has gone quiet—maybe even stalled. Values seem flat, transactions feel slower, and confidence is mixed. But when you step back and look at the data professionals are using behind the scenes, a very different picture emerges.
The insights that follow come from the December 9, 2025 Real Estate Forecast Summit, hosted by the National Association of REALTORS® (#NAR). I’m sharing them because this outlook speaks directly to the kinds of properties most investors actually own—homes, condos, townhomes, and small multifamily—not large institutional real estate that dominates headlines but rarely reflects real-world portfolios.
Why Residential Real Estate Forecasts Matter to Investors
Most real estate investors are not owners of large commercial properties. Instead, they own small residential income properties—single-family rentals, condos, townhomes, duplexes, triplexes, or four-plexes. Because of that, forecasts focused on residential real estate are often more relevant than those centered on institutional or large-scale commercial markets.
The observations below reflect national trends, with the important caveat that all real estate is local, and real estate markets are cyclical—across property types, price points, and regions.
National Economic and Housing Insights
Presented by NAR Chief Economist Lawrence Yun
Dr. #LawrenceYun shared extensive data addressing a common disconnect between sentiment and reality in housing markets.
Many owners feel that home values in their area have been flat, sluggish, or even down in recent years. However, when looking back over the five-year period since Q1 2020, the data tells a very different story.
Even states with the lowest five-year appreciation—including:
California: 45.7%
Oregon: 43.0%
Colorado: 45.1%
West Virginia: 45.5%
—have still experienced remarkably strong cumulative growth.
As Dr. Yun noted, real estate rarely moves in a straight line—but over full cycles, time in the market has mattered far more than timing the market.
At the other end of the spectrum, the top five states for five-year home value growth were:
Montana: 70.8%
Vermont: 71.0%
Rhode Island: 73.5%
New Hampshire: 74.9%
Maine: 80.1%
Certainly, the rapid appreciation immediately following the COVID period contributed to these figures. Still, this reinforces a long-standing reality: real estate has historically been a long-term investment, not a short-term trade.
Interest Rates and the Fed Outlook
Dr. Yun is currently forecasting two Federal Reserve rate cuts in 2026, which could result in mortgage rates approaching 6.0% later in the year.
Importantly, he reminded attendees that Fed rate changes and mortgage rates do not move in a one-to-one relationship. In other words, a Fed rate cut does not automatically translate into an equivalent drop in mortgage rates. Market expectations, inflation outlooks, and bond markets all play a role—often causing mortgage rate movements that differ in timing and magnitude from Fed actions.
Dr. Yun cautioned against assuming that Federal Reserve rate cuts immediately translate into lower mortgage rates. While Fed policy influences borrowing costs, mortgage rates are shaped by broader market forces—including inflation expectations and bond markets—often causing them to move independently.
Housing Sales and Pricing Expectations
NAR expects 2025 residential home sales to finish essentially flat compared to 2024 (approximately +0.1%). Looking ahead:
Existing home sales are forecast to grow by 14%
New home sales are expected to increase by 5%
Median home prices are projected to rise by approximately 4% overall
For investors, this points to modest price appreciation paired with improving transaction activity—an environment that tends to reward patience, solid underwriting, and realistic cash-flow expectations.
Who Is Buying Homes Today?
Insights from NAR Deputy Chief Economist Jessica Lautz
#JessicaLautz shared several noteworthy trends about the changing makeup of homebuyers in 2025.
First-time buyers represented just 21% of total purchases. The average age of a first-time buyer has risen to 40, compared to the historical norm of the late 20s. This reflects ongoing affordability challenges, higher student loan burdens, lifestyle spending choices earlier in life, and—though to a lesser extent—recent interest-rate volatility.
Among first-time buyers:
25% were single women
10% were single men
For context, in 1985, single women and men accounted for 11% and 9%, respectively. This shift highlights both demographic change and evolving household formation patterns.
Another interesting takeaway: despite unprecedented access to technology, data, and direct-to-consumer platforms, the use of professional representation remains extremely high.
91% of sellers used a licensed real estate agent
88% of buyers used a real estate agent
For Sale By Owner (FSBO) transactions declined to an all-time low of 5%
According to NAR Deputy Chief Economist Jessica Lautz, today’s housing market reflects not just affordability pressures, but changing life patterns—where buyers are entering the market later, with more financial complexity, and a greater need for professional guidance.
In short, even with more information available than ever, most buyers and sellers still value professional guidance—particularly in complex or uncertain markets.
Want to Dive Deeper?
If you’d like to explore the underlying research in more detail, you can download the presentation materials from:
These slides expand on many of the themes summarized above and provide additional charts and regional context.
Written by Rich Arzaga, CFP®, CCIM, Founder, The Real Estate Whisperer® Financial Planning. Helping clients and advisors integrate real estate into holistic financial plans.
As always, forecasts are not guarantees—but understanding the broader economic and housing backdrop helps investors make better-reasoned, long-term decisions.
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