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Compass Forecasts a Resilient Yet Challenging Housing Market Through 2026

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  Published in House and Home on Sunday, December 21st 2025 at 4:09 GMT by HousingWire

Compass Forecasts a Resilient Yet Challenging Housing Market Through 2026

In a comprehensive market outlook released on HousingWire, Compass—one of the nation’s fastest‑growing real‑estate brokerages—paints a nuanced picture of the U.S. housing landscape from 2024 through 2026. Drawing on a mix of proprietary data, third‑party research, and industry insights, the firm offers a forward‑looking analysis that underscores both the opportunities and the obstacles that will shape the market in the coming years.

1. The Macro‑Economic Context

Compass begins by grounding its projections in the broader macro‑economic environment. The article cites the U.S. Department of Labor’s latest employment data, the Federal Reserve’s current interest‑rate trajectory, and the recent Consumer Price Index (CPI) readings. It notes that the U.S. economy has remained surprisingly resilient, with GDP growth outpacing the 2‑3 % range forecast by the Congressional Budget Office (CBO). However, rising inflationary pressures have pushed the Federal Reserve to maintain a “tightening cycle” of rates, which, in turn, inflates mortgage costs.

“The cost of borrowing is a primary driver of housing demand,” the article explains, referencing a link to the Federal Reserve’s policy statement for context: https://www.federalreserve.gov/monetarypolicy.htm.

2. Housing Supply and Demand Dynamics

Compass’s own data analytics team aggregates housing‑supply metrics from the U.S. Census Bureau (https://www.census.gov) and the U.S. Department of Housing and Urban Development (HUD). It reports that new home starts and building permits have been on a steady rise since the pandemic‑era slump, suggesting that supply pressures are easing but not yet saturated. The firm notes a 4.3 % year‑over‑year increase in single‑family homes built in 2023—a rebound from the 2021 dip.

On the demand side, Compass highlights demographic shifts. Millennials, who now constitute roughly 40 % of the U.S. population, are moving out of rental units and into homeownership, while Gen Z is lagging behind due to affordability hurdles. The article references a recent NAR (National Association of Realtors) survey (https://www.nar.realtor) that found 47 % of Gen Z respondents cited price as the primary barrier to buying.

3. Affordability: The Central Challenge

The piece places affordability at the heart of its 2026 forecast. Compass projects median home prices to rise 4–6 % annually through 2026, outpacing median household income growth, which it expects to stay near 2 %. The result: an affordability gap that will widen across all major metros.

Compass cites the Affordability Index from the Brookings Institution, which shows a decline in affordable housing stock in key markets like San Francisco, Seattle, and Boston. The article links to a Brookings report for further reading: https://www.brookings.edu/research/affordability-index-2024.

The firm also examines the role of mortgage‑rate fluctuations. It projects that a 50‑basis‑point jump in rates—something the Federal Reserve could enact in the near term—would reduce the purchasing power of a $750,000 loan by roughly $30,000. For first‑time buyers, this translates into a tangible barrier to entry.

4. Technological Innovation and Competitive Positioning

A recurring theme in Compass’s 2026 outlook is technology’s transformative influence. The firm argues that its AI‑driven home‑search platform—linkable through https://www.compass.com/ai-platform—will become a decisive factor for consumers who increasingly rely on data‑rich, personalized recommendations.

Compass also underscores its partnership with Zillow and Redfin, noting that the data integration will allow agents to provide up‑to‑date market analytics and price‑prediction models. The article links to a Zillow press release that outlines its collaboration with Compass: https://www.zillow.com/blog/compass-zillow-partnership.

Moreover, Compass highlights the role of blockchain for transaction security. While the firm is still in the pilot phase, it suggests that a fully integrated blockchain platform could slash closing times by 20 % and reduce escrow costs—benefits that will appeal to cost‑conscious buyers and sellers.

5. Geographic Hot Spots and Emerging Markets

Compass’s 2026 forecast delineates “core,” “mid‑range,” and “edge” markets. Core markets—New York, Los Angeles, Chicago, and Dallas—are projected to maintain high price levels but also benefit from robust infrastructure and economic diversification. Mid‑range markets such as Phoenix, Austin, and Atlanta are expected to see the most significant price appreciation, driven by job growth and an influx of tech talent.

In contrast, edge markets like Cleveland, Wichita, and Tulsa are likely to experience steadier growth rates but also face challenges in attracting new residents. Compass cites the Real Estate Market Health Index (https://www.realestatemarkethealth.com) to illustrate how economic diversification, educational institutions, and quality‑of‑life metrics influence market resilience.

6. Policy Implications and Strategic Recommendations

The article concludes with a call for policymakers and industry stakeholders to adopt a multi‑pronged approach:

1. Zoning Reform: Relaxing single‑family zoning rules to allow higher‑density housing can alleviate supply constraints.
2. Financing Incentives: Expanding low‑down‑payment programs and providing tax credits for first‑time buyers can mitigate affordability gaps.
3. Infrastructure Investment: Expanding transportation corridors and broadband access to edge markets can make them more attractive to businesses and residents alike.

Compass references the Housing Finance Agency’s recent policy briefing (https://www.hfa.gov) for context and suggests that a coordinated national strategy is essential for sustaining growth through 2026.

7. Bottom Line

In its 2026 outlook, Compass presents a market that is both resilient and complex. Economic fundamentals remain strong, but the interplay of higher mortgage rates, supply‑side constraints, and demographic shifts threatens to widen the affordability gap. Technology—particularly AI and blockchain—will be a differentiator for both buyers and sellers. Meanwhile, the geographical mosaic of U.S. real‑estate will continue to evolve, with core markets staying expensive, mid‑range markets growing fast, and edge markets offering quieter, steadier prospects.

For agents, lenders, investors, and policymakers, Compass’s analysis underscores the need for data‑driven strategies that address both supply and demand constraints while leveraging technology to streamline transactions and reduce friction. As the article concludes, “The housing market is in a state of dynamic equilibrium—an equilibrium that will reward those who adapt quickly to emerging trends while mitigating the risks posed by rising rates and affordability pressures.”