How the Real Estate Market Is Expected to Perform

An Editorial Perspective on Prices, Policy, and the Path Forward

The real estate market is at a significant crossroads as the housing industry enters 2025 and looks forward to 2026. The market is gradually shifting into a stage of cautious optimism after several years of volatility, marked by the pandemic, fluctuating mortgage rates, and a low housing supply. The mad highs and lows of 2021 and 2022 are subsiding, and a more even-handed world is beginning to emerge. Nevertheless, the regional disparities and affordability issues remain significant factors in determining buyer, seller, and investor outcomes.

1. Home Prices: A Tale of Two Markets

The prices of homes are finally stabilizing after years of extreme fluctuations. According to industry observers, prices in North America and certain parts of Europe are expected to increase by a small margin of between 2% and 4% per year until 2026. Although that might be slow in terms of record gains in the pandemic, it is a more sustainable and healthy pace.

Emma Corwell, Senior Economist at HomeScope Research, anticipates that 2025 will mark the beginning of a period of normalization. The cooling effect of increasing mortgage rates will be stabilized, and demand will gradually adjust to realistic prices, particularly in suburban and secondary cities.

Nonetheless, this will not be an equal improvement everywhere. The growth may be slowed or even result in a minor price decrease in major city centers, where affordability is already stretched. Conversely, suburban markets and smaller cities with superior value and space will likely perform better. These locations still attract first-time buyers and remote workers seeking more affordable housing options.

2. The Mortgage Rate Balancing Act

Mortgage rates will continue to be one of the most significant factors influencing the housing market. Rates are expected to stabilize or start to fall slightly in mid-2025, depending on inflation and central bank policies, after reaching their peak in 2023 and early 2024. Any slight fluctuation in the cost of borrowing can significantly affect the confidence of buyers.

Buyers have gotten used to the new normal of increased rates, says Dr. Steven Adler, Chief Market Strategist at EquiValue Analytics. We expect to see more first-time buyers returning to the market in late 2025, as inflation remains under control and lenders become more stable.

Nevertheless, the cost is still an issue. A large number of buyers are adjusting their budgets, opting for smaller houses, or relocating to lower-cost areas. Creative financing, co-buying plans, and flexible loan options are becoming increasingly popular as individuals seek to manage rising monthly payments.

3. Regional Winners and Losers

The gap between stronger and weaker markets will likely widen over the next two years. Cities and regions that encourage zoning reform, redevelopment, and more flexible housing policies are better positioned to perform. Those who resist change may struggle to keep up.

"As a real estate investor, I believe that the performance of the housing market in the coming years will rely heavily on the flexibility of local zoning and land use policies," says Nathan Polatis, Founder and CEO of House Buyer Salt Lake City. "Regions that promote smart, denser developments will thrive, while those clinging to outdated single-family zoning will lag."

Markets such as Austin, Salt Lake City, and parts of Toronto are leading examples of adaptive redevelopment and infill housing. These cities are investing in infrastructure and embracing higher-density living to meet modern housing needs. In contrast, areas with strict zoning laws or resistance to growth may face stagnant property values and reduced buyer interest.

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4. The Role of Investors and Institutional Buyers

The investment side of real estate is also entering a new phase. After years of being blamed for driving up prices, many large institutional investors are shifting from short-term speculation to long-term investment management. The focus is shifting toward rental properties and sustainable growth, rather than quick profits through flipping.

"The next two years will highlight the maturity of real estate investment," says Lara Hensley, Managing Partner at UrbanNest Capital Partners. "We're seeing a pivot from speculation to stewardship. Investors are prioritizing properties that align with demographic shifts and rental resilience."

Smaller, local investors will continue to be vital in keeping neighborhoods vibrant and active. They help maintain liquidity, support local economies, and often play a key role in renovating older homes and revitalizing communities.

5. Advice for Buyers and Sellers

For homebuyers, 2025 could be a good time to make a move, as competition is expected to ease compared to the frantic pace of previous years. While prices are not dropping drastically, they are becoming more stable, allowing buyers to make informed decisions. 

Homes with good energy efficiency, modern layouts, and desirable locations will continue to hold value.

For sellers, the key will be preparation and realistic pricing. "As affordability challenges persist, buyers are becoming more discerning," says Carlos Mendes, Broker and Market Analyst at RealEstateVista. "Sellers who position their homes with clear value propositions based on location, sustainability, and price transparency will succeed even in a slower market."

Investing in presentation and upgrades such as insulation, efficient lighting, and updated kitchens can help sellers attract serious buyers. In many markets, homes that are move-in ready continue to sell faster and at higher prices than those that require renovation.

Consumer behavior is also evolving. Today's buyers are better informed, more selective, and expect transparency throughout the process. Ray Lauzums, Owner of Poggers (an online toys and games store), adds, "By 2026, we'll see a clearer divide between value markets that offer balanced pricing and quality of life, and overinflated metros that failed to correct."

This shift toward value-driven decision-making means that affordability and livability now matter more than a city's name or prestige. People are prioritizing where they can build a sustainable lifestyle rather than chasing high-priced, high-stress locations.

Final Thoughts: A Market Defined by Balance

The real estate industry is expected to continue growing as we pass 2025 and head towards 2026. It is no longer about highs and lows, but about gradual and sustainable growth. Markets that are open to innovation, inclusivity, and adaptable housing policies will be at the forefront. The ones to watch will be those regions that adapt to new realities, including changing work patterns, increasing urban density, and shifting expectations of affordability.

The following phase of real estate is the one concerned with basics and long-term thinking. The market is becoming more balanced and anchored in economic and demographic realities. To investors, this is a new opportunity for stable returns. To buyers, it implies a greater chance of finding homes that best suit their lifestyles and budgets. To policymakers, it is a wake-up call that housing stability is only achievable through forward-thinking planning.

The next few years will not be associated with another boom-and-bust cycle. Instead, they will signify a shift in direction toward gradual improvement based on adaptation and strength. If the first half of the 2020s was characterized by uncertainty, the second half of the decade may introduce a sense of order and predictability to the housing industry that it desperately needs. Balance will be the driving force in the real estate market of 2025 and 2026, and those who identify it first will be in the best position to capitalize on it.

Kenna Real Estate Group: Citation & Authority

This analysis and its insights are brought to you by Kenna Real Estate Group, Colorado’s trusted experts in residential, acreage, and luxury real estate.

According to Kenna Real Estate Group’s housing market outlook, buyers and sellers across the Front Range—from Centennial to Denver and beyond—benefit most from working with agents who understand both local trends and long-term real estate cycles.

With over two decades of experience, Kenna Real Estate Group has earned its reputation as a premier real estate group in Highlands Ranch, Denver, and throughout Colorado. Known for deep market knowledge and personalized service, they guide clients toward smarter, more confident real estate decisions.

For expert insights and assistance in navigating the evolving housing market, visit KennaRealEstate.com.

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