NEW YORK — The U.S. housing market is forecast to post a 1.7 percent increase in home prices in 2026, continuing a run of appreciation that has defied earlier expectations of a broader downturn.

Fifteen-year fixed-rate mortgages averaged 5.6 percent in the first half of 2026. That rate is expected to hold through 2027, marking a period of stability rather than the sharp decline some buyers had anticipated.

The 5.6 percent average sits well below the 7 percent highs of 2023, offering meaningful relief compared to peak borrowing costs three years prior.

Mortgage rates are shaped by the federal funds rate, the 10-year Treasury yield and labor market data. The 10-year yield has remained elevated, supporting expectations of steady mortgage costs and reflecting the bond market's pricing of persistent inflation and cautious monetary policy.

The 15-year rate figures are derived from Fannie Mae's 30-year loan forecasts by subtracting the average spread between the two loan types — 0.72 percentage points from July 2025 to July 2026.

Zillow independently forecasts home values to rise 1.2 percent in 2026, broadly consistent with the consensus view of moderate price growth. Both projections are well below the double-digit gains recorded in 2021 and 2022.

Homes are taking longer to sell, and sellers are increasingly offering concessions — repairs, closing cost contributions — giving buyers more room to negotiate on price and terms.

National forecasts reflect broad trends, but local dynamics vary sharply. Individual ZIP codes can show price and inventory patterns that diverge significantly from national averages.

For homeowners with existing mortgages, duration risk remains tied to rate movements. Refinancing becomes attractive if rates fall, but waiting for an optimal rate risks losing a suitable property at a favorable price.