The U.S. housing market has been characterized by a persistent imbalance in recent months. Demand has been muted due to stubbornly high house prices, while supply has slowly but surely increased as new construction picks up. Could the market regain equilibrium in 2026, and are house prices expected to fall?  

What’s the forecast for US house prices in 2026?

After nearly doubling in the last decade, J.P. Morgan Global Research sees U.S. house prices stalling at 0% in 2026, with a slight improvement in demand likely offsetting any increased supply.

While fixed-rate mortgage rates are projected to stay elevated at 6+%, adjustable-rate mortgage (ARM) rates could tick downward if the Fed decides to ease, thereby making homes more affordable. In addition, homebuilders are continuing to offer rate buydowns — in which they pay a sum upfront to help lower the buyer’s mortgage rate — in a bid to clear their inventory. “We think this could be enough, along with a rising wealth effect, to shift demand higher while supply increases subside. Consequently, we expect home prices to stall at 0% nationally in 2026,” observed John Sim, head of Securitized Products Research at J.P. Morgan.

There are, of course, regional variations. House prices are falling the most along the West Coast and Sun Belt, where there remains a glut of new homes following the pandemic-era construction boom. “It should not be a surprise that supply is a key factor in areas where we see home prices decline,” Sim said.

Indeed, the size of the housing shortage in the U.S. has been overemphasized, with J.P. Morgan Global Research putting the figure at around 1.2 million homes — significantly below other market estimates. Looking back over the past 30 years, new household formations and housing completions net out to nearly zero. In addition, housing supply has climbed in recent months. “Overbuilding is a sure path to home price declines, and builders have been navigating an increasing supply of new homes,” Sim added. 

How might new policies impact the US housing market?

In response to the affordability crisis, the Trump administration recently announced two new housing reforms. The first is a ban on institutional investors purchasing single-family homes, which is aimed at easing competition for first-time buyers. “However, institutional investors make up only about 1–3% of the market, so the policy is unlikely to be a game-changer,” Lupton noted.

What’s more, many institutional investors have in recent years pivoted to building their own build-to-rent communities as opposed to buying homes on the open market. “If the proposed ban also prevents these large operators from building their own homes or communities, we believe this could potentially have the opposite effect and theoretically tighten overall supply, as it would prevent more rental homes from entering the market,” said Michael Rehaut, head of U.S. Homebuilding and Building Products Research at J.P. Morgan.

There could also be other implications for the rental market if the policy successfully drives a meaningful increase in for-sale housing activity. “Our early thought is that the impact on landlords is small — perhaps less than a 1% annual headwind to net operating income (NOI) for a couple of years, in isolation,” observed Anthony Paolone, co-head of U.S. Real Estate Stock Research at J.P. Morgan. “While a headwind of this magnitude is not nothing, especially given the very low market rent growth for landlords over the past few years, it also seems less impactful than the normal range of outcomes.” 

Under the second reform, the Trump administration has instructed the Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal National Mortgage Association (Fannie Mae) to buy up to $200 billion in mortgage-backed securities (MBS) in order to drive down mortgage rates and reduce borrowing costs. 

However, this policy might once again have limited impact on the housing market. According to J.P. Morgan Global Research, the $200 billion purchase accounts for just ~1.4% of the approximately $14.5 trillion mortgage market, and will likely reduce 30-year mortgage yields by only 10–15 bp at most. “Secondly, most homebuilders already offer potential buyers mortgage rate buydowns of 100 bp to as much as 200 bp below the prevailing mortgage rate,” Rehaut said. “As a result, we do not believe a modest lowering of the market mortgage rate will have a material impact on demand.”