If the housing market feels harder to read this year, you're not imagining it.
Many economists entered 2026 expecting a stronger rebound in housing activity. Forecasts called for lower mortgage rates, improved affordability, and a meaningful increase in buyer demand. Instead, the first half of the year delivered a more complicated reality.
Mortgage rates remained higher than anticipated, inflation proved more persistent, and global economic uncertainty continued to influence financial markets. As a result, many buyers and sellers have been left wondering what comes next and whether the market will gain momentum before the end of the year.
Here's what changed and what it means for today's housing market.
Mortgage Rates Are Expected To Stay Higher for Longer
One of the biggest reasons housing forecasts have been revised is the path of mortgage rates.
At the end of 2025, many analysts expected rates to move lower throughout 2026. Instead, rates have remained elevated, creating ongoing affordability challenges for buyers nationwide.
Current projections suggest mortgage rates will likely remain in the mid 6% range through much of the remainder of the year. While that is still an improvement compared to some of the higher levels seen in recent years, it is not the substantial decline many prospective buyers were hoping for.
Of course, mortgage rates can change quickly if inflation cools more rapidly or economic conditions shift. But for now, most forecasts suggest buyers should plan around today's rate environment rather than waiting for dramatically lower borrowing costs.
Existing Home Sales Have Been Revised Downward
Higher financing costs have had a direct impact on buyer activity.
Economists have lowered their projections for existing home sales compared to where they expected the market to be at the start of the year. Many buyers, particularly first-time purchasers, continue to face affordability challenges that make it more difficult to enter the market.
Even with these revised forecasts, housing activity is still expected to exceed last year's pace nationally. The market has not stalled. Instead, it has settled into a slower but active environment where motivated buyers and sellers continue to transact.
One encouraging sign is that pending sales activity has shown improvement in several recent months. That suggests demand remains present, even if higher mortgage rates are limiting the number of buyers willing or able to move forward immediately.
For buyers who are financially prepared today, less competition can create opportunities that may not exist once rates eventually stabilize and more sidelined buyers return to the market.
New Construction Is Providing More Opportunities
The new construction market has also experienced a slower year than many builders originally anticipated.
Because demand has softened in some areas, many builders remain motivated to attract buyers through incentives, rate buydowns, closing cost assistance, and pricing flexibility.
While new construction inventory is more limited in San Francisco than in many suburban markets, buyers considering newly built homes throughout the Bay Area may find opportunities to negotiate more favorable terms than they could during the highly competitive years of the recent housing boom.
For some buyers, that additional leverage has become one of the more positive developments in today's market.
Home Prices Continue To Show Resilience
Perhaps the most important takeaway from the latest housing forecasts is that home prices are still expected to rise overall.
Despite slower sales activity, most economists have not significantly reduced their expectations for home price growth in 2026.
The primary reason is simple: inventory remains relatively constrained. While demand has cooled from peak levels, the supply of available homes remains insufficient to create widespread downward pressure on prices.
This trend is particularly relevant in markets like San Francisco, where limited housing inventory has historically helped support long term property values.
That doesn't mean every neighborhood or property type will perform identically. Real estate remains highly local. Some markets are experiencing more balance, while others continue to see strong competition for well-priced homes.
However, current forecasts do not point toward a broad national decline in home values. Instead, they suggest continued, modest appreciation across much of the country.
What This Means for Buyers and Sellers
The housing market has not rebounded as quickly as many experts anticipated, but it remains fundamentally active.
Higher borrowing costs and economic uncertainty have slowed the pace of recovery, leading economists to adjust their expectations for the remainder of the year. At the same time, buyer demand remains present, inventory remains limited, and home prices continue to show stability.
For buyers, today's market may offer less competition and greater negotiating power than a future market with lower rates and increased demand.
For sellers, current conditions continue to support home values, especially for well-prepared and properly priced properties.
The key is understanding what is happening in your specific market rather than relying solely on national headlines.
Thinking About Buying or Selling in San Francisco?
National trends provide valuable context, but every neighborhood, property type, and price point behaves differently. If you're considering a move in San Francisco or want to understand how current market conditions may affect your plans, let's connect. I can provide a personalized analysis of your local market and help you make confident, informed decisions in today's evolving housing landscape.
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Source: keepingcurrentmatters.com