2026 Housing Market Predictions: Crash or No Crash?

Every year, headlines scream about housing crashes, bubbles, and booms. And every year, someone confidently predicts the next 2008.

But what if 2026 turns out to be something far less dramatic?

What if the real story is stability?

I’m Keith Walker, and in my annual market forecast, we’re cutting through the noise and focusing strictly on the data — not speculation, not clickbait, and not fear-driven narratives.

Let’s break down what’s actually happening.

Supply & Demand: The Most Misunderstood Metric

There’s a common refrain right now: “There are no buyers.”

That’s simply not true.

Mortgage purchase applications — one of the most reliable forward-looking indicators — have been trending upward month over month and year over year for more than six months.

Yes, sales are down 53% from the immediate post-pandemic peak. But they’re also up 27% compared to three years ago.

Demand is not gone. It has normalized.

On the supply side, inventory has been historically low due largely to the “lock-in effect.” Homeowners with 3% mortgages have little incentive to sell when today’s rates are higher.

And here’s an important statistic many overlook:
79% of homebuyers are also home sellers.

When someone moves, they usually both sell and buy — meaning supply and demand are deeply interconnected.

Inventory is up 8.5% year over year.
But it remains 85% below the 2008 peak.

That’s a massive difference — and a clear indicator that we are nowhere near crash territory.

A Balanced Market — Exactly as Predicted

Last year was relatively flat. That’s exactly what I forecasted.

And frankly, that’s healthy.

After the 30- to 40-offer frenzy markets we experienced, a calmer, balanced market is necessary to maintain long-term appreciation.

• Pending sales are at multi-year highs.
• Purchase applications are at multi-year highs.
• Price cuts are slowing year over year.

The recovery curve began improving around mid-June 2025 and has continued steadily into 2026.

This is not volatility. This is normalization.

The Real Driver: Interest Rates

Affordability depends on three variables:

• Home Prices (steady)

• Wages (increasing)

• Interest Rates

Prices have remained steady.
Wages are trending upward.
Mortgage rates have declined meaningfully from recent highs.

Rates started the year around 6.25%, briefly touched 5.99%, and are now hovering near 6.1% — roughly a full percentage point lower than last year and two points lower than two years ago.

That’s a 33% improvement from peak levels.

Waiting for 3% again? That’s highly unlikely. And if it ever happens, refinance immediately.

If rates fall toward 5.75%, expect a surge in activity:

• More trade-up sellers entering the market

• Increased competition

• Entry-level inventory expanding

• Stronger pricing momentum

Lower rates narrow the psychological and financial gap for “locked-in” homeowners.

What About Foreclosures?

You’ve likely seen headlines about foreclosures rising 20%.

Context matters.

That increase reflects the lifting of temporary moratoriums on FHA and VA loans. Those numbers have already stabilized.

Nationally:

• Foreclosures remain 40% below pre-pandemic levels

• Delinquencies are trending downward

• Less than 2% of purchase loans in Santa Clara County fall into this category

There is no forced selling wave forming.

Homeowners in Silicon Valley are sitting on near-record equity levels.

That is not the recipe for a crash.

Silicon Valley: A Unicorn Market

Always remember — Silicon Valley is not average America.

We are one of the strongest equity markets in the country. Regional variation matters.

Some homes will sit longer due to:

• Location

• School districts

• Size or layout

• External factors (busy streets, power lines, etc.)

But broadly speaking, this is a stable and healthy market.

The 2026 Outlook

What does the data suggest moving forward?

• Modest sales growth

• Gradual affordability improvement

• Steady pricing

• Increased activity compared to last year

Housing affordability is now the best it has been in four years.

And here’s something most people won’t say:

A boring housing market is a good thing.

• Boring builds equity.
• Boring builds long-term wealth.
• Boring builds sustainable appreciation.

While others chase headlines, I’ll keep chasing the data.

Because stability — not sensationalism — is what truly drives real estate wealth.

I’m Keith Walker, here to educate and navigate, not speculate and fabricate.

The story of 2026 is just getting started.

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