The U.S. housing market is expected to face renewed pressure in the fourth quarter of 2026 as elevated mortgage rates weigh on home sales and limit home value appreciation, according to Zillow's October housing market forecast.
Zillow's latest weekly data showed newly pending existing-home sales falling 12.8% year over year, signaling a potentially significant decline in October sales. Despite the expected fourth-quarter slowdown, existing-home sales are still projected to finish 2026 slightly above 2025 levels, with Zillow forecasting a 0.9% annual increase.
Housing inventory is expected to rise 6.6% year over year in the fourth quarter, while home value growth is projected to remain modest at 0.7% for the full year, bringing the typical U.S. home value to approximately $362,100.
Meanwhile, rental growth continues to strengthen across both single-family rentals (SFR) and multifamily housing. Zillow forecasts single-family rents to increase 3.2% year over year in the fourth quarter, compared with 2.4% growth for multifamily rents. For the full year, single-family rents are projected to rise 2.9%, while multifamily rents are expected to grow 1.7%.
The forecast highlights uncertainty surrounding the direction of mortgage rates, which will largely depend on inflation and broader economic conditions. If economic growth weakens and investors shift toward longer-term securities, mortgage rates could decline, potentially supporting a recovery in home sales. However, persistent inflation could keep borrowing costs elevated and extend the housing market slowdown.
For SFR and multifamily operators, the outlook underscores a housing market in transition, with slower home sales, expanding inventory, modest home value appreciation, and continued rental growth shaping conditions heading into 2027.
Source: Zillow Research
