Housing Market Shifts as Affordability Finally Breaks a Long Stagnation

A Shift in the Housing Market: Affordability Finally Improves According to Mike Simonsen, chief economist at top residential real estate brokerage Compass, the housing market is on the cusp of a significant transformation. After years of stagnant growth, Simonsen predicts that the next era in the housing market will be marked by improved affordability, driven by rising incomes and weakening home prices. As of the latest data, the median home price in the United States has reached $364,900, a 4.5% increase from the previous year. However, this growth has been largely driven by a shortage of available homes, rather than a surge in demand. In fact, home sales have flatlined, with a 6.4% decline in existing home sales in the third quarter of this year, according to the National Association of Realtors. Simonsen attributes this slowdown to the unaffordable conditions that have characterized the housing market in recent years. With demand outpacing supply, home prices have skyrocketed, pricing many would-be buyers out of the market. As a result, demand has cooled, and sales have slowed. However, Simonsen believes that this trend is about to reverse. With incomes rising faster than prices, affordability is finally improving, a development that should continue into 2026. According to Redfin, a recent report predicted a "Great Housing Reset" in 2026, citing stronger income and weaker home prices as key drivers of this shift. The impact of this shift will be significant. As prices become more favorable for house hunters, sales are expected to pick up, with Simonsen predicting a 5-7% increase in home sales next year. Additionally, the number of homes on the market is expected to increase, providing buyers with more options and reducing the competition that has driven up prices in recent years. Compass, the company where Simonsen serves as chief economist, has seen its business impacted by the changing market conditions. As a top residential real estate brokerage, Compass has a significant stake in the health of the housing market. However, with its focus on technology and innovation, the company is well-positioned to adapt to the changing market conditions. Looking ahead, the future outlook for the housing market is bright. With affordability finally improving, demand is expected to pick up, driving sales and economic growth. As Simonsen noted, "It's not a dramatic improvement, but it's the start of a new era." With the housing market poised for a significant shift, investors and industry insiders will be watching closely to see how this trend plays out in the coming year.