Home buying has been a game of “wait and see” in recent years as consumers hold out for friendlier interest rates and economic conditions. Purchasing activity has varied widely, with Zillow reporting 2025’s final sales numbers of just more than 4 million homes[1], which is only slightly higher than 2024’s multi-year lows. Buying decisions are hinging largely on income levels and geography, with many sitting on the sidelines entirely.

Despite still elevated interest rates and some regional inventory shortages, the U.S. has largely transitioned to a buyer’s market, which may portend opportunity for those searching for a new home, while inspiring others to stick with what they’ve got. It’s a trend that PNC Head of Home Lending, Peter McCarthy, expects may continue into 2026 even as national mortgage rates are expected to slowly fall, consistent with expected Federal Reserve rate cuts.

“Many potential buyers have been forced to the sidelines in 2025, particularly those who have relied on financing,” McCarthy said. “At the same time, there’s a sizable group of potential homeowners who may greatly underestimate their purchasing power and ability to own a home. We feel 2026 will be very similar in that it will present opportunities for some homebuyers, while others may find it’s a better time to invest in and improve their existing home.”

What’s ahead for home buying in 2026?

PNC Home Lending executives Joe Perveiler and Jim Breeze share their thoughts on what’s ahead in home lending in 2026:

Modest rate drops  

For potential buyers waiting on rates to drop in 2026, it’s likely they’ll get their wish, but it may not be as dramatic a shift as many consumers are hoping for. Perveiler said that while existing interest rates may not be high on a historical scale, they’re still significantly elevated from the 2-3% range of the early pandemic recovery period. That has caused some potential buyers to sit on the sidelines in hopes that rates will return to those lows – a hope that Perveiler says is unlikely to occur.  

Instead, a more moderate interest rate drop is likely in store for 2026. The rate reduction is unlikely to drive a significantly higher purchasing or refinance wave among consumers, but may be enough to move some to action. Rates are more likely to inspire existing homeowners – especially those who purchased at a lower interest rate -- to seek alternate solutions like home equity products to make adjustments to their existing home, rather than trade their low rate for a potentially higher one.

Location matters

Affordability is not one-size-fits-all, and one of the biggest contributing factors to will continue to be geography. It’s generally true that home values on the coasts are higher than in the middle of the country. However, external factors including rising insurance costs and shrinking available inventory are further driving prices higher in coastal areas.

“Each market is a situation of its own with its own unique factors that will affect what the lending environment will be in the coming year,” Breeze said. “Affordability is as much about location as it is about income.”

Inventory and Prices to Drive Demand for Key Loan Types

While modest interest rate declines may not dramatically boost overall homebuying activity, Perveiler sees potential growth in specific lending segments — particularly construction loans and jumbo mortgages. Construction lending could benefit from ongoing inventory shortages in some geographies, as more buyers turn to building new homes. Meanwhile, jumbo loans may see increased demand in high-cost markets where home prices continue to exceed conforming loan limits, despite rate sensitivity remaining a factor for both products.

Opportunity in Equity

Home equity is poised to be the biggest growth opportunity for lenders in the coming year. As homeowners seek to adapt their current spaces or leverage their equity in their home to meet other financial needs, this segment is gaining momentum. According to Perveiler, many homeowners are reluctant to give up historically low mortgage rates secured in recent years, making home improvements a more appealing alternative to refinancing or purchasing a new home. Additionally, rising home values in many markets are encouraging homeowners to stay put, viewing long-term ownership as a smart strategy for building wealth.

What the 2026 Outlook Means for Consumers: Key Considerations Before Buying a Home or Tapping into Home Equity

There’s no way to predict interest rates, inventory levels or the future economy, but that doesn’t mean potential buyers need to sit on the sidelines indefinitely. Homebuying is about finding the right opportunity and right property for your unique needs – not attempting to time the market.

“Waiting for a better rate environment can be a responsible choice, but the opportunity cost can outweigh the potential benefit,” Perveiler said. “The best time to buy a home is when you're personally ready. A loan officer can help assess that readiness in the context of your broader financial goals.”

With modest rate movement and continued inventory challenges expected in 2026, consumers should weigh several factors before deciding whether it’s the right time to buy:

  • Compare rent vs. mortgage costs: In some markets, purchasing a home may offer long-term savings, even with elevated prices.
  • Look beyond interest rates: Insurance, closing costs and other fees can significantly impact the total cost of ownership.
  • Think long-term: A home remains a key wealth-building tool, especially for middle-class Americans, and may appreciate over time.
  • Evaluate alternatives to buying: For current homeowners, using a home equity loan or line of credit to fund improvements may be more cost-effective than purchasing a new property.
  • Consult with a lender: Lenders are there to help buyers understand their options and find the best fit for their financial situation. Products like adjustable-rate mortgages may offer flexibility and potential savings if rates decline later in the year. And for those not yet ready to buy, a lender can help build a strategy to get there — it’s all about making progress toward homeownership.

Explore assistance programs

For some individuals, the best decision will be to work with a lender to develop a path to homeownership. But many prospective buyers underestimate their purchasing power or aren’t aware of the tools available to help them. First-time and low-income buyers, in particular, may qualify for programs that assist with down payments, closing costs, and other expenses. Additionally, buyers should explore federal government loans and programs as well as those from lenders that provide down payment assistance or more lenient credit standards - making homeownership more attainable than they might think.

“For many people, buying a home is the largest purchase they’ll ever make, so it’s natural to approach the decision with caution,” Breeze said. “But if you're at a life stage where homeownership aligns with your goals, short-term interest rates shouldn't deter you from a long-term investment that typically appreciates over time.”

The property securing the CHELOC must be located in a state where PNC offers home equity products. PNC does not offer the CHELOC product in Alaska, Hawaii, Louisiana, Mississippi, Nevada and South Dakota.