A ‘new era’ in the housing market is about to begin as affordability finally improves

Home sales stabilized amid unsustainable conditions after rising demand collided with tepid growth in supply, sending home prices higher. Potential buyers became so frustrated that demand slowed and remained sluggish.

Prices are now more favorable to home seekers, a trend that should continue in 2026 and change the narrative in the housing market.

“In the next era, this story flips,” Simonsen told CNBC on Friday. “So, sales are starting to rise, but prices are constrained or perhaps low. Incomes are rising faster than prices, so affordability improves for the first time in many years.” “It’s not a radical improvement, but it’s the beginning of a new era.”

His view echoes a recent report from Redfin, which also pointed to stronger incomes and weaker home prices, predicting a “significant housing reset” in 2026.

In addition to potential buyers giving up on finding an affordable home, sellers have given up on finding someone willing to buy at the price they want.

As a result, the number of homes taken off the market has jumped this year. In June, these write-offs were up 47% compared to the previous year.

Listing withdrawals tend to be owner-occupied homes, which means they can be latent demand as well as supply, Simonsen said. This is because two transactions will be needed: The owners want to buy a new home but must sell their current home.

“In an environment where conditions are improving a little bit, we actually estimate that this is a representation of shadow demand — people who want to move, people who have delayed their moves for maybe four years now,” he said, adding that there are about 150,000 such homeowners.

His housing market forecast for a new era of improving affordability does not depend on a sharp decline in mortgage rates. In fact, the decline may stimulate demand so significantly that it may lead to higher prices.

Simonsen expects prices to remain in the low 6% range, allowing sales to grow while keeping home prices in check as more inventory comes on the market.

The price environment is already showing auspicious signs for potential buyers. More than half of homes in the United States have decreased in value over the past year, but homeowners can still sell with a net gain as the value has risen an average of 67% since their home was last sold, according to data from Zillow.

A separate report from Zillow found that homebuyers are getting record discounts. While the typical single discount remains $10,000, desperate sellers are increasingly offering multiple discounts as subdued demand leaves homes on the market longer. As a result, the cumulative price reduction in October reached $25,000.

“Most homeowners have seen the value of their homes rise over the past several years, which gives them the flexibility to take a price cut or two while still making a profit,” Kara Ng, chief economist at Zillow, said in a statement last month. “These reductions bring more listings into line with buyers’ budgets, and help fuel the busiest housing market in three years. Patient buyers are reaping the rewards as the market continues to rebalance.”