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Fortune's 2025 Outlook: 2026 Housing Market Reset, Income Growth, and Home-Price Trends

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  Published in House and Home on Saturday, December 6th 2025 at 8:37 GMT by Fortune

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Fortune’s 2025 Outlook on the U.S. Housing Market: A 2026 Reset, Income Growth, and Home‑Price Trends

Fortune’s latest feature, published on December 6, 2025, takes a deep dive into the projected trajectory of the U.S. housing market for the next few years. Drawing heavily on data from Redfin, the article charts a cautious “reset” in home‑price growth for 2026, highlights how modest gains in household income will influence affordability, and explains how Redfin’s AI‑driven forecasting model is shaping the narrative. The piece is anchored by a handful of external links—including a Redfin blog post on the 2025 housing outlook and a recent CNBC analysis of mortgage‑rate trends—allowing readers to cross‑check the assumptions behind the headline figures.

1. The “Reset” Narrative

Fortune frames the 2026 market as a “reset” period, following the steep price surges that fueled the pandemic‑era boom. In 2023 and 2024, the median U.S. home price jumped by 18 % and 12 % respectively, thanks to historically low mortgage rates, a shortage of inventory, and a flood of buyers moving away from major metros. But as the article explains, that runaway trajectory is now slowing. The 2026 forecast anticipates a 1.8 % increase in median home prices—a figure that is roughly half the pace of the previous two years and aligns with the National Association of Realtors’ (NAR) own “Realtor Price Index” projection for the same period.

The term “reset” is used to convey that the market is no longer in a speculative, high‑growth phase but rather entering a more sustainable, gradual‑upward trend. Redfin’s AI model, built on over 1.7 million recent listings and 500 million historical sales, projects a modest 0.5 % annual price growth from 2026 to 2028. This suggests a return to a “normal” trajectory similar to the 2010‑2019 baseline, where the median price grew about 3–4 % annually.

2. Income Growth and Affordability

One of the core insights is the link between household income growth and home‑price elasticity. Fortune cites Redfin’s analysis that median household income is expected to rise by 4.2 % in 2026—a modest uptick compared with the 5.8 % increase seen in 2024. This growth is driven by a steady recovery of the job market, especially in high‑growth sectors such as technology and renewable energy, and a rise in the share of households earning $70k–$99k.

With incomes rising but home prices growing even more slowly, the article notes a subtle improvement in the Housing Affordability Index (HAI). Redfin projects a 3‑point rise in the HAI for 2026, moving from 55.1 in 2025 to 58.3. While still below the pre‑COVID “normal” of 65, the shift indicates that buyers may feel a little more breathing room, especially in mid‑size metros that have seen the largest price gains during the pandemic.

Fortune also discusses how affordability is uneven across the country. While the Midwest and South see the most pronounced gains in HAI, the West remains the most expensive. The article references a link to a recent Bloomberg piece that delves into the regional price‑to‑income ratios, reinforcing the idea that a one‑size‑fits‑all view of affordability is inadequate.

3. Redfin’s Forecasting Methodology

A significant portion of the article explains how Redfin’s model works and why it diverges from other industry forecasts. Key points include:

• Machine‑Learning on Real‑Time Data: Redfin uses a deep‑learning model that ingests daily listing updates, price‑changes, days‑on‑market statistics, and macro‑economic inputs (interest rates, employment figures, and inflation). By training on more than a decade of data, the model learns non‑linear patterns that traditional econometric models often miss.

• Geospatial Granularity: Instead of aggregating across broad states or regions, Redfin’s forecast is broken down into 2,000+ ZIP code clusters. This granularity allows for micro‑level insights, such as a projected 4.5 % price rise in the 94102 ZIP code (San Francisco) versus a 0.5 % drop in 75001 (Dallas).

• Scenario Analysis: The model runs multiple scenarios based on potential interest‑rate shocks. The article links to a Redfin blog post that details how a 50 bps uptick in the Fed’s policy rate in 2026 would dampen price growth by an additional 1.3 % across the country.

Fortune’s article notes that Redfin’s forecast is “more conservative” than the NAR’s, which projects a 2.5 % price increase for 2026. The difference stems primarily from Redfin’s higher weight on the inventory‑to‑sales ratio (the article cites a link to a Census Bureau report that shows inventory is currently at a 4‑month level—much higher than the 2‑month peak seen in 2022).

4. Key Drivers of the 2026 Reset

The article lists several macro‑economic forces that underpin the forecast:

Fortune also discusses the “house‑price multiplier” effect: the article explains how price swings feed back into buyer sentiment. As mortgage rates climb, affordability deteriorates, dampening demand and consequently slowing price growth. The article links to a research note by the Brookings Institution that provides a historical view of this multiplier, underscoring that the 2026 scenario is consistent with past cycles.

5. What the Reset Means for Buyers and Sellers

The piece offers practical take‑aways:

• Buyers: Those who are in the market now should expect a modest price increase but also a slightly higher mortgage payment. The article cites a link to a Redfin calculator that shows how a 3 % price bump translates to a $1,200 increase in a $350,000 loan’s monthly payment if rates rise to 5.5 %.

• Sellers: Sellers in high‑growth metros may still see a decent appreciation, but the article warns that inventory will creep up and curb the rapid price momentum. The Redfin blog link offers a guide on staging homes to reduce days‑on‑market during the reset.

• Investors: The article notes that REITs that focus on multifamily assets may benefit from the steady rental‑price uptick, as Redfin’s data shows rental growth outpacing home‑price growth in 2026.

6. Broader Economic Context

Fortune ties the housing forecast to the broader macroeconomic environment. It highlights that:

• Federal Reserve policy will remain a critical lever; a steady 0.25 % rate hike each quarter is expected in 2026.
• Fiscal stimulus from the upcoming budget cycle could inject an additional $50 B into the housing market via down‑payment assistance programs, slightly nudging price growth upward.
• Demographic shifts—particularly the aging of the Baby Boomer cohort—will shift demand from single‑family homes to senior living and assisted‑living facilities, a trend that Redfin notes may create sub‑market price variations.

Fortune closes with a reference to a recent study from the Urban Institute that suggests that a balanced mix of affordable housing and market‑rate units is essential for sustaining long‑term price stability. This aligns with Redfin’s own stance on the importance of maintaining a diverse housing supply to keep the “reset” from turning into a prolonged downturn.

7. Bottom Line

Fortune’s article distills a complex set of data into a clear narrative: the U.S. housing market is poised for a calmer, more predictable growth phase in 2026. While median home prices are projected to climb modestly—only about 1.8 % versus the 12–18 % gains of the past two years—the accompanying modest rise in household incomes should provide a slight buffer to affordability pressures. Redfin’s AI‑powered forecast, though conservative, offers a nuanced, geospatially detailed view that helps stakeholders—homebuyers, sellers, and investors—make informed decisions in a market that is gradually moving out of its pandemic‑era boom.

Readers are encouraged to explore the linked sources (Redfin’s own blog, Bloomberg’s interest‑rate analysis, and the National Association of Realtors’ price index) for deeper dives into the data and the assumptions that underpin this “reset” narrative.