Fannie Mae Forecast: Housing Market Set for Steady, Moderate Growth Through 2026

The U.S. housing market is expected to regain momentum slowly but steadily as it moves into 2026, according to a new outlook from Fannie Mae. The organization’s Economic and Strategic Research (ESR) Group released its Housing Forecast: December 2025, which points to improving home sales, stable construction activity, and easing pressure in the mortgage market over the next two years.

While mortgage rates remain elevated by historical standards, the forecast suggests that gradual rate relief and stable demand will support a measured recovery rather than a sharp rebound.

Home Construction Holds Firm Despite Affordability Pressures

Fannie Mae expects total housing starts to remain near 1.3 million units per year in 2026, roughly in line with 2025 levels. This signals that builders are maintaining activity even as buyers continue to face affordability challenges.

Single-family construction is projected to see a modest pickup after recent slowdowns, supported by limited resale inventory and steady household formation. Multifamily construction, which was uneven in 2025, is expected to level out as supply and demand come back into better balance.

Overall, construction growth is expected to stay controlled, helping prevent major oversupply while still adding much-needed housing stock.

Home Sales Expected to Climb in 2026

Home sales are forecast to rise meaningfully next year. Fannie Mae projects total annual home sales reaching about 5.5 million units by late 2026, representing close to a 7% year-over-year increase based on quarterly trends.

Both new-home and existing-home sales are expected to contribute to the growth. As mortgage rates slowly ease and buyers adjust to the “new normal” in pricing, more households are expected to re-enter the market after staying on the sidelines.

This gradual increase reflects broader participation across regions rather than a surge driven by any single segment.

Home Price Growth Slows but Remains Positive

After several years of strong price gains, the pace of growth is expected to cool. The Fannie Mae House Price Index (HPI) is projected to remain positive through 2026 and into 2027, but with slower annual increases.

This moderation reflects affordability limits, higher borrowing costs, and differences across local markets. While prices are not expected to fall on a national level, rapid appreciation seen in recent years is unlikely to continue.

Mortgage Rates and Lending Activity Show Improvement

Mortgage rates remain a key factor shaping the outlook. Fannie Mae expects the 30-year fixed-rate mortgage to average above 6% through much of 2025 and into 2026, with gradual easing later in the forecast period.

As rates slowly move lower, mortgage activity is expected to improve. Total mortgage originations are projected to rise in 2026, driven mainly by stronger purchase demand. Refinancing activity is also expected to continue, though at lower levels than during past rate-driven refi booms.

A Balanced Path Forward for Housing

Fannie Mae’s forecast suggests a housing market defined by balance rather than extremes. Stable demand, slower price growth, and measured construction activity are expected to shape conditions through 2026, even as economic and policy factors continue to evolve.

For buyers, sellers, and lenders, the message is clear: the housing market is not racing ahead, but it is moving forward slowly rebuilding momentum as affordability gradually improves and uncertainty fades. For direct financing consultations or mortgage options for you visit 👉 Nadlan Capital Group.