NAR Economist’s Predictions for 2026 Housing Market

Falling mortgage rates will drive activity in the housing market in the coming year, the National Association of Realtors’ top economist said on Monday.

Speaking to the Chicago Association of Realtors’ 2026 Market Outlook conference, NAR Chief Economist Lawrence Yun said lower rates will bring more buyers into the market, while the stagnated inventory in Chicagoland will start to loosen up as homeowners’ life circumstances change.

Days after national brokerage Compass closed its bid to buy Anywhere Real Estate, its next-biggest competitor, presenters at the conference made no mention of the effect consolidation may have on the industry, or the fight over private listings brewing between Compass and Chicago’s local MLS, MRED.

Instead, the conference focused on the macro trends that will drive the housing market over the next year. The 30-year mortgage rate fell below 6 percent this month for the first time since 2023, sparking confidence that consumers will jump into the housing market.

“After three years of seeing 7 percent mortgage rate, 6 percent or even 5.9 percent mortgage rate appears much, much better,” Yun said. “The consumers’ mindset may be, yeah, this is the time to get into the market.”

Nationally, that will inject some needed juice into a housing market that was essentially flat in 2025, according to NAR’s estimates. Yun said he expects existing home sales to rise by 14 percent nationwide in 2026. NAR does not have forecasts for Chicago specifically, but a December Illinois Realtors study predicted a 5.1 percent increase in home sales in the Chicago metro area in 2026.

Chicago’s home prices have risen significantly in recent years, but a combination of high interest rates and low inventory have meant sales volume is down compared to pre-pandemic levels. But those pressures may ease throughout 2026, Yun said.

“You are beginning to see more inventory coming onto the market, because even though (homeowners) were sincere to say they love their 3 percent mortgage rates, some have experienced major life-changing events,” Yun said, like having children or retiring. “So with the passage of time, expect more inventory.”

The economy is sending mixed signals, Yun said, but he dismissed concerns about a major housing crash in the coming year. He noted that although the stock market is at record highs and job growth has been solid, defaults on auto and credit card loans are spiking, spelling distress in some sectors.

Still, mortgage defaults and foreclosures have remained near record lows after spiking in 2020, showing owners are largely not having trouble paying their mortgages.

“Given that there’s very little distress among homeowners, don’t expect any kind of price crash,” he said.

Federal and local policy could also affect home sales this year. President Donald Trump’s direction for Fannie Mae and Freddie Mac to buy $200 billion worth of mortgage-backed securities last week sparked a dip in mortgage rates, which may increase buying power and drive up demand. But Yun said policies to increase supply are needed to prevent a spike in prices.

“We have to have supply. Without the supply, extra demand just leads to higher prices and more unaffordability,” he said. “So we need to ensure that there’s constant supply coming onto the market as we are trying to produce the demand.”

Policies that increase supply could include tax credits for development, Yun said, as well as zoning changes to allow for denser housing. Illinois Realtors is backing state legislation to expand accessory dwelling units and multi-unit housing developments in more cities around the state.