Courtesy Steven Luttman
By Steve Luttman, broker/owner of SJ Lincoln Realty
Depending on who you ask, 2025 was either a step forward financially, or two steps back. The past twelve months shone a light on the existence of two very different economies within the United States. Asset prices continued their upward trajectory, with stock indexes, precious metals and cryptocurrencies reaching new highs. For those on the other end of the economic spectrum, stubbornly high inflation and rising unemployment disproportionately impacted the middle class and below. GDP remained solid, supported by strong consumer spending and A.I. data center build out. The job market began to show signs of weakness, as both the unemployment rate and the number of long term unemployed increased sharply towards year end.
The Federal Reserve experienced a uniquely noisy year including surprise resignations and allegations of fraud. Housing price growth moderated, experiencing a slight uptick versus the year prior. Mortgage rates spent most of the year trending downwards, albeit double where we were just five years ago. Home sales experienced back to back lackluster years, with affordability concerns and many not willing to give up their existing low rates hindering transaction volumes.
As we begin 2026, a theme for the year has already started to emerge: Affordability. The newly sworn in Mayor of NYC ran on a platform heavily focused upon the high cost of living. This is not a uniquely metropolitan problem however. A recent survey by Resume Now found only 12% of workers reported their wages have kept up with inflation. Goldman Sachs’ Q4 report on housing found the nationwide home price-to-income ratio to be at historic highs.
Various policies to address housing insecurity have been proposed which include freezing rents, banning investor purchases as well as a resumption of quantitative easing in the mortgage backed securities market. Governor Hochul’s plan to mandate local housing construction failed in large part due to opposition from municipalities over the fears of what comes with higher density. Recent legislation in Albany legalized Accessory Dwelling Units (ADUs) with offering property tax exemptions for their construction.
The Capital Region continues to be an attractive place to live, which is reflected in housing prices. Local employment headlined by health care and state agencies should hold up well against any macroeconomic downturn, plus planned expansions at Regeneron and Global Foundries acting as additional draws for new higher income earners.
Big picture, housing experts are anticipating modest home value appreciation in 2026. Fannie Mae, Zillow and The National Association of Realtors all forecast prices rising roughly 2.0% over the next twelve months, a significant cooling off from the periods of 10%+ seen post 2020. Should wage growth be in line with economist’s expectations of 3.5%, buyers will experience slight improvement in overall affordability.
An additional benefit to buyers in 2026 would be interest rates continuing the downward trend seen late last year. Current consensus is the Federal Funds Rate will be cut twice between now and next January. For a buyer purchasing at the Capital Region’s median price, a 50 basis point drop would translate into nearly $100 in monthly savings. Recent history has shown mortgage rates to be impacted, but not directly correlated to, actions taken by the Federal Reserve. Long range inflation expectations, geopolitical events and labor markets all play a role in what we pay as borrowers. The National Association of Home Builders, Mortgage Bankers Association and Wells Fargo all project the 30 year fixed rate mortgage to spend 2026 between 6.0% and 6.50%. Given the level of uncertainty surrounding what goes into a mortgage rate, timing the market is generally considered a fool’s errand.
Easing of rates will hopefully lubricate what has been a stagnant home sale market. Nationwide home sales have hovered around four million over the past several years, 20% less than pre-pandemic. Owners who bought or refinanced during the historical low rate environment of 2020-21 have been reluctant to sell and relinquish such a privilege. The pain of trading out becomes more palpable the lower current rates go. Low transaction volumes are not bad only for consumers, but for all involved in the real estate ecosystem. Real estate agents like myself along with lenders, attorneys, title companies, home inspectors, appraisers and moving companies all rely on people buying and selling homes to stay in business. Roughly 1 in 6 U.S. jobs is directly or indirectly connected to real estate.
Overall, 2026 is shaping up to be a year defined less by rapid growth and more by gradual normalization. Modest home price appreciation, easing mortgage rates, and steady wage gains should offer incremental relief to affordability, though still challenging by historical standards. For buyers and sellers alike, realistic expectations will matter more than perfect market timing. In a housing market still constrained by supply and shaped by broader economic forces, progress is likely to be slow, but heading in a positive direction.