Housing industry economic trends: What to know for 2026

Key takeaways

The housing market is one of the major drivers of today’s inflation trends. With affordability pressures touching millions of households as home prices, rental rates and borrowing costs continue to shift, understanding their impact on overall inflation is more important than ever. 

Understanding economic trends affecting the housing industry

Listen to the Nationwide Market Insights podcast 
How the housing market is raising the roof on inflation 

How does housing show up in the inflation data?

Housing costs are typically the largest monthly expense for a household and have a significant influence on inflation trends when we look at the primary inflation readings like the consumer price index (CPI) and the personal consumption expenditures (PCE) price index. With the CPI, shelter comprises more than 35% of the headline number that we get each month, and more than 40% of the core CPI reading—by far the largest major category within the CPI calculation.  

As a starting point for a discussion around inflation, there are two main housing subcomponents. First is rent of primary residence, measuring changes in market rent. The other is the owner’s equivalent rent (OER), and is by far the larger component at more than a quarter of the total CPI measurement. For people that own their home, it’s designed to track changes in the cost of shelter, without including the investment portion of buying a home.  

Both of these measures cooled over the course of 2025 and helped to offset some of the costs impacted by tariffs last year. Reviewing the January 2026 CPI data, the annual increase in rent of primary residents has slowed to 2.8% and OER dropped to 3.3%.¹ Each of these are the coolest readings since 2021, at that time we were seeing housing costs really start to accelerate and they’ve been ever since. From an overall price inflation standpoint, the overall shelter component has eased to about 3% annual inflation rate.¹ 

What are we expecting for rental and housing prices in 2026?

Starting with the rental side of the market, completions of multifamily housing units have been elevated for the past couple of years. There were over 600,000 apartments and condo units completed in 2024, and nearly 500,000 in 2025². Those numbers are far above the long-term average of about 350,000-375,000. It’s caused a bit of a downward shift in rent prices across the country. The national average rent CPI has slowed to about 2.8%. This likely means the overall rent of primary residence inflation will soften further at least over the first half of 2026, a much slower pace than 2024 and 2025. Contained inflationary pressures on the rental end of things should help the overall shelter and inflation rate to continue to be soft over the course of 2026. 

Shifting to the owner-occupied space, house prices have eased across the country given some of the portability constraints that many buyers are facing in the market. The median sales price of an average existing home was only up 0.9%³ over the past year as of January. Some markets have seen outright price declines as people are pulling back from the owner-occupied space. 

On the affordability front, OER tends to lag most of those market-based home price measures, but we would expect the inflation rate for OER and the broader shelter cost within the CPI to fade a little further over the first half of 2026 as well to about 2.5% over much of 2026. House prices could reach an inflection point in 2026 and start to turn higher. Lower mortgage rates may drive interest in home buying and that could boost demand, and an accompanying jolt for prices. Overall, we expect house prices to climb about 2.5% this year.

What’s happening with mortgage rates?

We’re not seeing meaningful downside risks to mortgage rates from the administration’s efforts with new approaches to housing finance, including the banning of institutional purchases of homes and trying to lower the regulatory burden. In addition to the general landscape of the economy, including inflation, treasury rates and the Fed, we now have a normalized term premium that also suggests that we’re going to see limited downside pressure on mortgage rates. Additionally, the Fed cut rates last year. Going forward, we see two more cuts in 2026, but that’s the consensus expectation, meaning markets are already anticipating this and already priced in into the current mortgage rates.  Without meaningful downside pressure, we’re looking for the 30-year fixed rate in 2026 to remain around 6%.  

Looking ahead: What could change the housing market in 2026?

When it comes to the overall housing market outlook and when conditions may start to feel more normal, we’re really seeing the industry in transition. Overall housing activity from a home construction standpoint and in terms of home sales has been subdued for several years with low sales and a low building environment since coming out of the pandemic.

Elevated mortgage rates and the widespread affordability concerns have been the primary factors here, both holding down demand for home purchases because of the cost considerations, but also limiting supply because most homeowners are locked into well below market rates. Builders have not been able to ramp up construction due to cost and concerns on the demand side as well.  

While some of these constraints are starting to ease, it’s not enough for a change in the overall market conditions, it’s still going to be very expensive for many people who aren’t currently owning a home to jump into that purchase decision. Looking ahead, we expect home sales to begin regaining modest momentum later in 2026 as mortgage rates gradually move lower and affordability pressures start to ease. By 2027, a further decline in rates could encourage more existing homeowners to put their properties on the market. That increase in listings would help lift housing supply and bring the market closer to normal for prospective buyers after several years of tough conditions. 

Check out these additional resources

Stay up-to-date with timely data and commentary from our Nationwide economics team on financial markets, consumer activity, inflation and more. You can also subscribe to our weekly Economic Insights by Nationwide podcast. 

Find us however you listen below. 

Subscribe: Apple | iHeart |  Spotify |  Amazon