When I started 2026, I felt pretty good about where things were heading. According to Zillow Research, the forecast was for steady but modest improvement, with home sales expected to grow somewhere in that four to five percent range, though still not back to what we saw before the pandemic hit. Early on, it looked like that prediction was coming true. By the end of the first quarter, we were actually seeing monthly sales jump about five and a half percent compared to the year before.
Then mortgage rates started climbing through the second quarter, and that threw a wrench into everything. The momentum we had built up just stalled out. By May, year-over-year sales growth had slowed down to just one and a half percent, and Zillow's revised forecast for June showed sales climbing by less than one percent. It's the kind of change that catches your attention because it happened pretty quickly.
Looking ahead at the rest of 2026, Zillow is now expecting the market to basically flatline. They are projecting home values will rise by just a tenth of a percent this year, which is really minimal. The combination of more homes sitting on the market and buyers pulling back means home prices are going to stay under real pressure. That said, at least the pace of price growth has slowed enough that people's incomes might actually have a chance to catch up, which is something we haven't seen in a while.
On the sales volume side, Zillow is now estimating we will see about three point seven six million existing home sales in 2026, down slightly from their previous estimate. That would mean a small decline compared to 2025. The higher mortgage rates and recent weakness in purchasing activity are the main reasons they expect things to stay relatively quiet through the rest of the year.
One piece of good news is in the rental market. According to Zillow, single-family rents are expected to grow about three percent this year, while apartment rents should climb two percent. Both of those numbers are below what we have historically seen, so renters should feel at least a little relief from the pressure they have been under.
What I am seeing locally in the Bay Area and East Bay reflects a lot of what Zillow is describing nationally. Our market has always moved a bit differently than the rest of the country, but when mortgage rates rise like this, it hits hard everywhere. Buyers are getting more cautious, and that actually creates a better environment for negotiation than we have had in recent years. For sellers, it means you need to price realistically and present your home at its best because there are fewer motivated buyers out there right now. The good news is that for renters in our area, the slower growth in housing costs gives them more breathing room, and for buyers who are willing to be patient, there may be more opportunity to find value than there was just a few months ago.
