For much of the past few years, discussions about the U.S. housing market have focused on supply. We’re told there simply aren’t enough homes, and that once construction catches up, affordability will follow. But as I have discussed in previous posts, I don’t think that framing captures the reality on the ground. The United States knows how to build houses, but what it has struggled with is making them affordable to potential homeowners. Once again in 2026, it seems housing affordability is still a major challenge for the U.S. housing market, influenced by the combined weight of elevated home prices, higher borrowing costs, and rising expenses tied to ownership itself, such as insurance. But on the margins, there may be signs of change. Mortgage rates have eased from recent peaks and the so-called lock-in effect of yesteryear’s favorable rates, which kept many homeowners from selling, has begun to weaken. Might these factors have an impact on housing affordability in 2026?
The fading lock-in effect
One of the more notable lights at the end of the housing affordability tunnel is the gradual weakening of the mortgage rate “lock-in” effect. During the pandemic, millions of homeowners secured mortgages below 3%, making it financially unattractive to sell once rates rose into the 6% range. That meant that inventory was limited and turnover reduced, particularly for starter homes. But recent data shows that this imbalance is beginning to change. According to Fortune, as of late 2025, more homeowners now hold mortgages at or above current market rates than those still locked into ultra-low pandemic-era loans. This reduces the penalty associated with selling and may encourage some owners to re-enter the market.
That said, we should not confuse this shift with a meaningful restoration of affordability. Home prices remain well above pre-pandemic levels, and borrowing costs, while lower than they were at their peak, are still high compared to incomes. Even with slightly improved inventory, many buyers remain constrained by the total cost of ownership rather than availability alone. Reading CBRE’s 2026 outlook, we can see that the barriers to homeownership continue to support rental demand as households struggle to bridge the housing affordability gap. So an easing lock-in may help the market move more freely, but it does little to change the underlying economics facing hopeful buyers.
Affordability is about more than mortgage rates
Even as mortgages become more accessible, housing affordability is still marred by factors other than interest rates. Home prices remain significantly higher than pre-pandemic levels, and while mortgage rates have eased from their 2023 peak, they remain high relative to household incomes. According to a recent analysis cited in Fortune, over 75% of homes on the market are now unaffordable to the average household. Many buyers are tens of thousands of dollars short of what’s required to purchase a median-priced home.
In parallel, insurance premiums and property taxes have become increasingly significant burdens, particularly in high-growth or climate-exposed regions, such as Florida and California. This broader cost burden has made home ownership feel out of reach for many potential buyers, even where availability is high. These are also factors that reinforce demand for rented properties, which makes it harder for families to save for a down payment alongside the rising cost of living across the country. According to Bureau of Labor Statistics data, November 2025 saw significant increases in everyday costs compared to 2024, with coffee rising by almost 19%, and beef by approximately 15%, while medical costs were up some 7%.
What will the U.S. housing market look like in 2026?
Based on forecasts by Realtor.com, the U.S. cities expected to see the greatest YOY declines in home prices in 2026 include Cape Coral–Fort Myers, Florida (-10.2%), North Port–Sarasota–Bradenton, Florida (-8.9%), Stockton–Lodi, California (-4.1%), Raleigh, North Carolina (−3.7%) and Deltona–Daytona Beach–Ormond Beach, Florida (−3.6%). But generally speaking, the most realistic scenario for the year ahead is a slow and uneven adjustment of the market. Mortgage rates may be drifting lower and the fading “lock-in” effect could allow a slight uptick in listings, but this stage is set against a cost-of-living squeeze in the U.S. that continues to shape how households approach housing decisions.
According to market research, many have little margin to save for homeownership costs, making even modest purchases feel out of reach for many Americans. Many believe the cost of living in their area is unaffordable for the average family. In this sense, 2026 may bring incremental improvements in how the market presents, but we will not likely see the dramatic affordability turnaround many are hoping for. Broader cost obligations, beyond those directly associated with home ownership, will continue to define how accessible the U.S. housing market feels for most families.
For more insights and reflections from me on business, investment and real estate, take a look at the other articles on my blog, visit my YouTube channel and follow @williamerbey on social media.
