Were you underwhelmed by the 2025 housing market? Maybe you even took a step back from real estate investing as the market stalled under high prices, not-so-low interest rates, and fewer home sellers.
What’s in store for 2026? And are their investment opportunities worth pursuing in the coming year?
In this 2026 housing market forecast for real estate investors, we’ll break down the key conditions shaping the year ahead. And we’ll show you how to adapt your strategy to stay profitable in a market that rewards precision and patience.
Quick note: As a Los Angeles-based real estate investment company, Gatsby Investment provides local resources as well as national insights like this. If you’re interested in LA-specific data, check out our Los Angeles Real Estate Outlook for 2026.
Overview of the Residential Real Estate Market as We Enter 2026
Here is a snapshot of the American housing market as we enter 2026:
Stable home prices. While some geographic markets have seen prices dip recently, the nationwide median home sales price currently sits at $433,261 (as of December 2025), up a modest .7% year-over-year.
Slight declines in rental rates. As of November 2024, national rents for one and two-bedroom units have dipped by 2.2% and 1.2%, respectively.
Less activity. 363,194 American homes sold in December 2025, representing a decrease of 6.7% compared to the previous December.
Overall, the market is showing signs of stagnation, which is a pretty predictable response to high home prices and higher-than-we’re-used-to interest rates.
While this slow market is sidelining fair-weather investors, it’s creating opportunities for experienced investors!
3 Housing Market Conditions to Expect in 2026
Here’s what you can expect from the 2026 American housing market on the whole (and how you can work with it for a strong ROI)
While it’s important to remember that 6% is still less than the historical average (with rates sitting at double-digit figures throughout most of the 1980s), these rates feel high because rates had been so low for so long before the inflation-fighting jump of 2022.
And the feeling of being too high matters because it deters buyers and locks homeowners with hyper-low rates into “golden handcuffs” (they don’t want to give up their rate by selling and have to take out a new loan with today’s rates). So, buying and selling stalls. And the market slows.
How to Work with 2026’s Interest Rates
Don’t let today’s interest rates keep you from investing in real estate.
Can you imagine an investor in 1980 waiting for rates to fall below 5% before buying a home? They would have had to wait 23 years. And by then, the median home price would have increased by 65%. What they could have bought for $63,700 in 1980 would have cost $186,000 by 2003.
Instead of waiting for rates to fall, do what you can to work with today’s rates:
Maintain strong credit scores for lower rates. Lenders view borrowers with higher credit scores as less risky. So they offer favorable terms, such as lower rates.
Watch for opportunities to refinance if rates fall in the future. If rates drop, you can refinance to replace your existing mortgage with a new mortgage under the lower rates. Just know that you’ll likely need to maintain your financial position, gain home equity, and make your mortgage payments on time to qualify when the time comes.
Consider an adjustable-rate mortgage (ARM). Not only are introductory rates lower with an ARM than with a fixed-rate mortgage (typically for the first five years), but after that period, rates automatically adjust at set intervals to reflect changing market conditions. So, if rates fall, your mortgage will adjust without the need to refinance. Warning: If rates increase, your rate will automatically increase as well. So you may want to have an exit strategy, or watch rates so you can refi to a fixed-rate before rates increase.
Look for creative financing solutions. Assumable mortgages, for example, allow a buyer to take over an existing mortgage under the current terms as long as the down payment covers the seller’s equity. But you might need to search for such a seller since the mortgage would need to have been made assumable when originated, which is not the default. You might also consider seller carry-back financing, in which the seller serves as the lender, loaning you the money for the purchase and accepting monthly installment payments. The seller may be willing to offer a much lower rate than a traditional lender.
2. A Persistent Housing Shortage that Keeps a Floor Under Demand
We’ve been exploring Los Angeles’ housing shortage for years, but this isn’t a problem specific to our market. Nationwide, major researchers estimate that the US still needs around 3.7 million more housing units to meet demand (based on data through Q3 2024).
There are multiple reasons for the countrywide shortfall. Primarily, we’re just not building enough. Industry regulations, zoning restrictions, supply chain disruptions, and labor force shortages all make new construction difficult. And many individual investors simply don’t have the experience or time needed to oversee a new development from the ground up.
But there’s some good news. First, this lack of inventory helps protect home values (however, it’s critical that we find a balance between growth and accessibility to avoid pricing so many buyers out of the market that we end up with a real estate market bubble). Secondly, this creates an incredible opportunity for those with the resources to develop new units. Real estate developers (and those who invest in development via crowdfunding and syndication) are able to help ease the shortage to keep growth sustainable while also earning strong returns.
How to Work with Low Supply in 2026
Here are a few tips to work around the lack of inventory this year:
Go beyond the MLS. The Multiple Listing Service may not be full of motivated sellers right now, but you might find buying opportunities through tax sales, probate proceedings, pre-foreclosures, and foreclosures.
Nurture your network. Local real estate agents, developers, and even other investors could be your key to off-market deals.
Be the supplier. In a supply-short market, adding units is often a stronger long-term play than fighting over existing properties. If you have the resources, ground-up development is highly appealing in 2026.
3. Modest National Appreciation (with Big Differences in Local Pockets)
Most credible outlooks point to moderate home price growth rather than another surge. For example, Fannie Mae’s Home Price Expectations Survey has projected around 2.8% national home price growth in 2026.
Of course, with property values being hyper-local, there will be some markets that see much stronger gains, and some that see temporary dips. According to Zillow, the hottest housing markets for 2026 are expected to be in the Northeast and in California (Los Angeles came in at number eight). Florida, on the other hand, is looking at a market correctionafter several hot years.
Wherever you are in the country, 2026 is probably not the year to expect major market appreciation. But that shouldn’t deter you from investing.
How to Work with Modest Appreciation in 2026
If the market isn’t going to give you automatic gains, there are a few proactive steps you can take to improve ROI:
Look beyond your local market. If your market isn’t offering the return potential you’re looking for, consider investing in other markets, possibly even investing in property out of state.
Force appreciation. Rather than sitting back and expecting the market to increase home values for you, add value to your property through renovations, energy-efficient upgrades, or smart home technology.
Gain instant equity from ground-up development. A properly-managed new construction project is worth far more than the sum of the land, materials, and labor. The difference is earned equity.
Winning Real Estate Investment Strategies in 2026
Here are three key real estate investment strategies set to pay off well in the 2026 housing market.
1. Attainable Housing
Attainable housing refers to homes priced within reach of households earning roughly 70% to 100% of their area’s median income. While demand for this type of housing remains strong, supply continues to lag, creating a persistent imbalance and a clear opportunity for investors.
One creative way to tap into this niche is through value-add Tenancy in Common (TIC) projects. A TIC is an ownership structure where multiple buyers hold shared, undivided ownership of an entire property. Unlike condominiums, where each owner holds title to an individual unit, TIC owners collectively own the full building while designating specific units for personal use.
From an investment standpoint, this model allows buyers to acquire an older multi-family property, renovate and reposition it, and then sell interests to multiple TIC purchasers, often at a higher value than the building could command from an individual investor-buyer looking to rent it out.
2. Multi-Family Development
In markets where rental demand remains strong, smaller-scale multi-family development projects are likely to be especially attractive in 2026. Properties with around 6-10 units tend to move through permitting and construction more quickly than larger complexes. This means investors can get to the passive rental income phase faster. These smaller buildings are also appealing to other investors because they’re typically more affordable and easier to finance than large apartment properties.
You could sell the completed building for immediate returns, or use the build-to-rent (BTR) strategy, where you retain ownership after construction and lease out the units. This approach allows you to transition from development into long-term cash flow, creating a steady income stream rather than a one-time sale. Holding the property as a rental for a year or more also gives you the added benefit of lower long-term capital gains tax rates, to further improve your bottom line.
If you have the funds but not the experience, time, or desire to construct a multi-family building, you could invest in a multi-family built-for-you development. With this model, you outsource the development and lease-up to an experienced team. Every detail is handled for you, and you get sole ownership over the property upon completion!
3. Real Estate Syndication
If taking on an attainable housing or multi-family project feels out of reach (because of time constraints, limited capital, a lack of hands-on experience, or because you just don’t want the hassle), real estate syndication is a practical alternative.
With syndication, multiple investors combine funds to finance a single project. The project could be nearly anything, including the value-add TICs and small multi-family developments mentioned above. A professional real estate sponsormanages the entire process, from arranging financing and acquiring the property to overseeing construction and disbursing returns to investors. And because capital is pooled from multiple investors, the minimum investment requirements are extremely low compared to funding a project alone.
Invest in Residential Real Estate in 2026 with Gatsby Investment
At Gatsby Investment, we specialize in providing high-return potential real estate syndication deals to investors under any market conditions. Since completing our first projects in 2017, we’ve managed to provide average annualized returns of 22.3% to our investors. And since we take care of every detail of the project for you, your returns are completely passive!
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