Confusion is growing in the housing market as mortgage rates continue to hold at levels many find unaffordable, even while interest rates show signs of cooling. Some experts are suggesting that potential buyers should start gathering down payments to be ready when market conditions improve and rates drop to more acceptable levels.
Forecasts for 2026 generally predict a gradual decline in mortgage rates, with most experts projecting the 30-year fixed rate will average between 6% and 6.5%. Home prices are expected to rise more slowly than wages, at about 1% to 2%, which could improve affordability. Rates are anticipated to dip slightly from 2025 highs, though not dramatically.
The Trump administration's economic policies present what experts describe as a "wildcard" factor. Policies such as tariffs or pressure on the Federal Reserve could introduce volatility and potentially prevent rates from falling further. President Trump has consistently advocated for more aggressive rate cuts from the Fed, even suggesting a nominee's willingness to cut rates could be a litmus test for the Fed chair position, though this has not yet produced desired results. A Trump-led Fed might pursue more aggressive rate-cutting, which could put downward pressure on mortgage rates.
Tariffs could make various imported goods more expensive, potentially leading to higher inflation and increased homebuilding costs. Persistent inflation would likely keep mortgage rates elevated, as the Fed's primary mandate is price stability. The One Big Beautiful Bill Act (OBBBA), passed in July 2025, includes potential tax cuts and spending plans that could increase the U.S. government's debt burden. This may lead investors to demand higher yields on government debt, putting upward pressure on long-term interest rates and mortgage rates.
The Trump administration is also expected to pursue deregulation to encourage new home construction and increase housing supply. This could help stabilize or lower home prices, potentially counteracting some upward pressure from other policies.
A good time to buy a home is when personal finances align, but generally the market is expected to be more balanced in 2026, offering better affordability with potentially slightly lower mortgage rates. This could mark the beginning of a housing reset where incomes catch up to prices, making it ideal for first-time buyers to build equity, especially in the first half of the year before more buyers enter the market. Experts recommend focusing on personal readiness in terms of credit and savings, creating a long-term plan rather than trying to time the exact market bottom.