Nothing about the 2026 housing market has gone quite like we’ve expected, has it?
In its December 2025 Housing Forecast, Fannie Mae predicted that the 30-year mortgage rate would stay in the low-6% range for most of this year, then drop below 6% during the end of 2026 and throughout 2027.
Now, mortgage rates are hovering around 6.5%, according to Freddie Mac.
There had also been news about sellers cutting their listing prices and the national real estate market finally favoring homebuyers.
But the great “housing recovery” has paused, according to the Zillow May Market Report.
In my years of reporting on real estate, I’ve witnessed various factors impact the housing market. Mortgage rates, inventory, competition, and affordability are pieces of the housing puzzle, and when one piece breaks, the market suffers.
Zillow explains the ways each part shifted in May and what that means for homebuyers.
Annual new listings have decreased
New listings have decreased since this time last year. So, as you scroll through Zillow or Redfin, you may see the same listings repeatedly rather than discover newer places recently added to the market.
“New listings have historically peaked in May or June but sellers pulled back this May,” writes Mischa Fisher, Chief Economist for Zillow Group. New listings inched down just a little since April, but they’ve fallen 4.1% since last May.
Related: More on the housing market
Inventory is still increasing overall, but the rate is cooling. Inventory growth is only up 1% since last May.
“Weekly data suggests it could flatline in the next four weeks,” writes Fisher. “A June peak for options home shoppers have to choose from would be early on the calendar, possibly foreshadowing slower sales in the second half of the year.”
Home prices can increase when inventory remains low, especially if there are more potential homebuyers than there are houses for sale. This creates competition, which drives up housing costs.
Zillow finds that home sales are sluggish
Although home sales increased since April, the Zillow May Market Report showed that annual sales were down. Nationally, 341,929 sold in May — a 2.9% decrease since May 2025.
As mortgage rates have increased, home sales have decreased. More would-be homebuyers are waiting on the sidelines as they either wait for lower rates or truly cannot afford monthly payments at today’s interest rates.
More on real estate and the housing market:
- Americans face decision after mortgage rate news
- Fannie Mae makes bold housing market prediction
- Americans meet unexpected challenge with mortgage news
Remember when I mentioned that low inventory can drive up home prices if there is high buyer demand? While that’s true, it doesn’t seem to be what’s happening in the current housing market. (At least, not yet.)
Not only is supply low, but so is demand.
This could be the reason that month-over-month home prices only increased by 0.06%, and annual prices only rose by 0.8%. Zillow’s estimates put the typical monthly mortgage payment toward principal and interest at $1,861 (assuming a 20% down payment), which is 3.1% lower than last May.
What Zillow’s research means for homebuyers
- You could snag an affordable home. Demand and supply are both low, and home price growth is slowing. If you find a house you want to buy, you can probably get a good price. This helps offset the cost of a higher mortgage rate.
- You don’t have to rush to make an offer. Home listings took a median of 18 days to switch to “pending” in May, one day longer than in May 2025. You don’t need to make an offer as quickly as possible like people did at the peak of the COVID-19 pandemic, and the longer a home stays on the market, the more power you have as the buyer.
- Year-over-year mortgage rates are still down. The average 30-year fixed mortgage rate is 6.48%. This time last year, it was 6.85%, according to Freddie Mac.
- It could still be a good time to buy a house. Zillow says the “housing recovery” that had gained momentum earlier in 2026 has paused, largely due to high mortgage rates. But if you can still comfortably afford a home at today’s rates, then less competition and slow home price growth could make it an excellent time to buy.
