The real estate brokerage predicts daunting housing costs will push millions of Americans, especially millennials and Gen Z, to adapt their lifestyles dramatically.
WASHINGTON — The housing affordability crisis will force millions of Americans to make dramatic lifestyle choices in 2026, from moving back in with parents to postponing having children, according to new predictions from real estate brokerage Redfin.
Its new report forecasting next year’s housing trends describes what it calls “The Great Housing Reset” — a yearslong period of gradual market recovery that will begin next year but won’t provide quick relief for young families struggling to afford homes.
While some economic indicators are predicted to improve, with wages finally outpacing home prices for the first time since the Great Recession, the changes won’t be enough to restore traditional paths to homeownership for Gen Z and millennial buyers, Redfin said.
Here are some of Redfin’s 2026 predictions for the housing market.
Roommates and multigenerational living
The most striking predictions center on how high housing costs will fundamentally reshape American households.
About 6% of Americans who struggled to afford housing in mid-2025 moved in with their parents, while another 6% found roommates, according to Redfin. Those numbers are expected to climb throughout 2026.
“Household makeup will shift further away from the nuclear family, with more adult children living with their parents and vice versa,” the report states.
The portion of young adults living with parents remains historically high, though down from pandemic peaks. Homeownership rates for Gen Z and millennials flatlined in 2025, a trend Redfin expects to continue.
More drastically, the brokerage predicts high housing costs will lead to smaller families, as the already-declining fertility rate continues to fall.
Americans are also renovating homes to accommodate the new reality, with multigenerational features emerging as the top design trend for 2026.
In a November survey of more than 100 home renovation professionals by Thumbtack, separate suites for extended family were the most commonly cited trend. Redfin agents in Los Angeles and Nashville report more homeowners planning to convert garages into primary suites for adult children moving back home.
The shift reflects a practical response to economic pressure. With the typical mortgaged homeowner holding $181,000 in untapped equity as of mid-2025, many are choosing to renovate rather than help family members purchase separate homes.
Some buyers are finding even more creative solutions. Redfin reports that friends are increasingly pooling resources to buy homes together, often drafting prenup-style agreements to govern the arrangements.
Rate relief on the horizon?
The housing market is expected to see incremental improvements in 2026, but not enough to solve the affordability crisis.
Redfin predicts home prices will rise just 1% year-over-year, a dramatic slowdown from recent years. Mortgage rates are expected to average 6.3% for the year, down from 6.6% in 2025, occasionally dipping below 6% but not remaining there for meaningful periods.
Most significantly, wages are expected to grow faster than home prices for a sustained period — the first time that’s happened since the aftermath of the 2008 financial crisis.
Home sales are forecast to increase 3% to an annualized rate of 4.2 million, with a stronger spring buying season expected as rates drop from the 6.8% seen in spring 2025.
But Redfin warns the recovery will take time. The brokerage estimates it will take about five years for the housing market to return to normal, as housing costs soared much faster than earnings during the pandemic.
Redfin expects refinance volume to surge more than 30% in 2026 as homeowners with high mortgage rates will rush to refinance as rates decline.
Renters, however, face a less optimistic outlook. Rents are expected to rise 2% to 3% by the end of 2026 as apartment construction slows and demand increases. Many Americans will continue renting rather than buying due to expensive down payments and mortgage costs, intensifying competition for available units.
Hottest housing markets of 2026
Redfin identified clear winners and losers among housing markets for 2026.
The predicted hottest real estate markets include New York City suburbs — Long Island, the Hudson Valley, northern New Jersey and Fairfield County, Connecticut — as more workers return to offices. Meanwhile, Midwest and Great Lakes cities including Syracuse, Cleveland, St. Louis, Minneapolis and Madison, Wisconsin, will attract buyers seeking affordability and relative safety from climate disasters.
Recent college graduates, the report predicts, will gravitate toward small and mid-sized cities offering affordable rents and stable blue-collar careers as artificial intelligence displaces some entry-level white-collar jobs.
Meanwhile, former pandemic boom towns are predicted to cool off.
Nashville, Austin, San Antonio and coastal Florida cities including Fort Lauderdale, West Palm Beach and Miami will see homes languish on the market, Redfin predicts. The cooling stems partly from natural disasters and surging insurance costs, and partly from remote workers returning to offices elsewhere. Sellers in these markets may be forced to take losses.
Affordability becoming a bipartisan issue
The affordability crisis may finally unite politicians across party lines, Redfin predicts.
A bipartisan congressional caucus has already proposed the Yes in My Backyard Act, opening doors for policies that increase housing supply, while the Build More Housing Near Transit Act moves through Congress.
Other proposals could include zoning changes to ease construction of accessory dwelling units and home additions. Some states may expand manufactured and modular housing in rural areas, following New York’s example.
Redfin cautions that while sensible policies may chip away at the crisis, there’s no instant fix. Some attention-grabbing proposals, like 50-year mortgages, may emerge but won’t solve underlying affordability issues, the brokerage said.