At the 2026 Market Outlook, Dr. Lawrence Yun, Chief Economist for the National Association of REALTORS®, shared an outlook of the residential housing market, framing 2026 as a year of recovery.
After several years of suppressed sales activity driven largely by high mortgage rates and limited inventory, Dr. Yun outlined why conditions are setting the stage for renewed activity in the housing market, both nationally and in Chicago. Review Dr. Yun’s slideshow and key session takeaways below.
A Market Moving Toward Recovery
Residential real estate has experienced three consecutive years of historically low transaction volume, despite strong underlying demand. Dr. Yun emphasized that housing is inherently cyclical, and periods of prolonged slowdown are often followed by measurable rebounds once conditions improve.
For 2026, he projected an increase in home sales activity, driven by easing mortgage rates and gradually improving inventory.
“Even with stronger sales growth, we are still talking about recovery — not a return to pre-pandemic levels.”
Mortgage Rates Are Reopening the Market
Mortgage rates remain the most influential factor shaping buyer behavior, and recent declines are already beginning to shift sentiment. Rates that hovered near 7% last year have moved closer to the 6% range, improving affordability and encouraging buyers who had been waiting for a prime opportunity to re-engage.
Rather than fueling excess demand, Dr. Yun noted that these changes are helping unlock pent-up, practical demand from buyers who delayed decisions due to affordability constraints, not market speculation.
Why this matters for REALTORS®:
- Lower rates improve qualification odds for buyers
- Buyer confidence rises even with modest rate improvements
- Mortgage applications tend to lead sales activity
This shift creates more opportunity for REALTORS® to guide clients through renewed market activity.
Employment and Income Continue to Support Housing
Despite broader economic uncertainty, the labor market remains a stabilizing force for housing. Employment levels in the Chicagoland area are at or near record highs, and wage growth continues to outpace inflation for many households.
While job creation has slowed, Dr. Yun emphasized the importance of distinguishing between slower growth and job loss — a critical nuance for understanding housing stability.
“Most people who want to buy a home still have jobs, and that matters more than headlines.”
Strong employment supports consistent housing demand and helps explain why widespread distress is absent in today’s market.
Housing Wealth and Price Stability Remain Strong
One of the clearest signals of market stability is the strength of homeowner equity. Over the past five years, home values have risen substantially, resulting in record housing wealth across the country and in Chicago.
Importantly, this equity growth is not paired with elevated distress. Foreclosure rates remain historically low, reinforcing expectations of price stability rather than sharp corrections.
Key housing fundamentals that support prices:
- Strong equity positions among homeowners
- Low levels of forced selling
- Continued long-term demand for housing
Together, these factors create a foundation that supports steady pricing even as sales activity fluctuates.
Inventory Is Gradually Improving
Inventory constraints have been one of the most persistent challenges over the past several years. While many homeowners benefited from historically low mortgage rates and delayed selling, Dr. Yun noted that life events are beginning to outweigh these low rates.
Household changes, job transitions, downsizing and retirement are gradually bringing more listings to the market — a trend expected to continue into 2026.
This gradual increase in inventory, paired with easing mortgage rates, helps set the stage for healthier transaction volume without destabilizing prices.
What This Means for Chicago REALTORS®
The residential real estate outlook showed that opportunity is returning, but preparation matters. REALTORS® who understand the data, communicate clearly with clients and set realistic expectations will be best positioned to navigate the recovery.