Small investors get a rare break as home prices lose ground to inflation

Investing in American homes may be either a challenge or an opportunity right now, depending on the stage that investors are at.

Those already invested may be nervously watching the market, which continues to show softness, while those contemplating getting into the residential real estate investment market may have an extended period of weaker price gains.

Realtor.com's midyear outlook trims its 2026 home price growth forecast to just 1.2%, a pace that will not keep up with expected inflation of 3.4% for the year.

The typical monthly mortgage payment for a 2026 buyer is now projected to land 1.9% below last year's level, a bigger improvement than the 1.3% drop forecast in December. That gain reflects steadier mortgage rate expectations paired with softer price growth, and comes alongside stronger wage growth, meaning housing now claims a smaller slice of the average paycheck than previously modeled.

However, Realtor.com held its mortgage rate forecast at 6.3% for the year, unchanged from December, after a mix of sticky inflation and a resilient labor market erased rate relief seen earlier in 2026.

Inflation reached a three-year high of 4.2% in May, and the Federal Reserve's June statement, its first under chair Kevin Warsh, reinforced its commitment to price stability. Markets had been pricing in one to two rate cuts by year-end before February strikes on Iran; they now anticipate one to two hikes instead, though the 10-year Treasury yield has stayed within a 4% to 4.5% band, keeping mortgage rates broadly range-bound.

Softer sales

Existing-home sales are forecast to reach 4.10 million for 2026, a 1.0% annual gain but below Realtor.com's earlier projection of 4.13 million. Sales lagged year-ago levels across the first quarter before steadying in April and strengthening through May, leaving year-to-date volume just 0.2% ahead of 2025.

"Buyers and sellers have shown a lot of staying power this year," Hale said. "This is a market where people are adjusting and showing up rather than giving up. Sellers are meeting the market with more realistic asking prices, which is helping deals get done."

For investors weighing buy-to-rent strategies, income expectations warrant caution. Realtor.com now expects rents to fall 1.2% nationally in 2026, continuing last year's decline, as multifamily construction adds supply.

Vacancy rates hit 7.3% in the first quarter and are projected to finish the year near the long-run average of 7.2%. Whether that softness persists hinges on new supply keeping pace with demand; a slowdown in construction could stall or reverse the relief on the demand side of the ledger.

Investors should also weigh a less visible risk flagged in the update: the expanding use of private, off-MLS listing networks. Realtor.com has yet to find clear evidence the trend is moving prices or sales volumes, but it may be distorting inventory figures as homes change hands before ever reaching a public listing.

"Keeping listings off the open market changes the equation for everyone involved," Hale said. "Sellers who go private are trading away visibility and competition among buyers, and that competition is usually what pushes a sale price up. For buyers, it means they aren't seeing every home or the whole market, making it harder to know what a fair price even looks like. That's a real cost with real consequences and is something we should be cautious of as the market is starting to find its footing."

Tightening new supply?

On the supply side, builders are pulling back permits and starts most sharply in the South and West, the regions that typically account for most national construction and have largely closed earlier supply gaps.

Realtor.com puts the national homebuilding shortfall at roughly 4 million homes, with the Northeast and Midwest still facing the tightest conditions, and potentially the clearest opening for investors chasing undersupplied markets.

Homeownership, meanwhile, ticked higher than expected in the first quarter, reaching 65.3%, prompting Realtor.com to raise its full-year outlook. Younger households continue to face affordability hurdles, with a record share of 18- to 34-year-olds still living at home, though those who do buy are increasingly choosing ownership over renting.