United States Residential Real Estate Market Size & Share Analysis - Growth Trends and Forecast (2026 - 2031)

United States Residential Real Estate Market Trends and Insights

Mortgage Rates Easing and Improving Affordability

Mortgage rates are trending lower into 2026, with the 30-year fixed averaging 6.15% in December 2025, which is the lowest print of the year and a marked improvement from late 2024 conditions. The Federal Reserve reduced the policy rate to a 3.5–3.75% range by December 2025, reinforcing expectations for stable to slightly lower mortgage rates in 2026^{[2]https://www.federalreserve.gov/}. Forecasts point to further relief, with some outlooks expecting the average 30-year rate to move closer to the high 5% range in 2026, which would widen the pool of qualified buyers. Affordability is also improving because wage growth is now outpacing home price gains in multiple metros, which reduces payment-to-income ratios for median borrowers. The Midwest and parts of the South offer the strongest affordability readings, so these regions are positioned to lead the demand response as rates and payments step down from recent peaks. These factors together support steady absorption in the U.S. residential real estate market as financing conditions normalize and buyers regain confidence.

Pent-Up Demand Reflected In Rising Pending Sales

Pending home sales rose 3.3% month over month in November 2025 and reached their highest level in nearly three years, which signals a release of deferred demand into early 2026. Gains were broad-based across all four regions, pointing to a national rather than local inflection in buyer activity. Improved affordability and a modest expansion in active listings are giving buyers more options, and that is translating into higher contract signings. Purchase application trends and showing activity support a firmer transaction pipeline, which should lift closed sales as the U.S. residential real estate market transitions into the spring season. Even small rate declines can move marginal borrowers over approval thresholds, which boosts conversion and amplifies the near-term recovery in volumes.^{[3]https://www.nar.realtor/}

Builder Incentives and New-Home Supply Narrowing The Price Gap

The price gap between new and existing homes narrowed to a historic low near mid-2025, and in some submarkets new homes are now priced at or below comparable resales. Builders are using rate buydowns and closing-cost credits to maintain velocity, which has the effect of lowering effective monthly payments and widening the buyer funnel. Incentive packages have become central to sales strategies, with large builders leveraging captive mortgage subsidiaries to deliver below-market introductory payments where permitted. This pricing and financing advantage is most visible in the South and West, where new homes represent a larger share of listings and land pipelines remain deep. The strategy supports steady absorption of new supply and helps stabilize pricing in communities where resale inventory remains constrained by lock-in. These actions reinforce new-builds as a growth lever for the U.S. residential real estate market in 2026–2031.

Wage growth outpacing home price gains supports absorption

Median household income growth exceeded national home price appreciation in late 2025, which is improving affordability for median buyers and supporting transaction recovery. The resulting compression in price-to-income ratios is modest but meaningful in metros where price levels align with median wages, particularly in the Midwest. Midwestern markets like Columbus and Indianapolis continue to show affordability readings above national norms, and that positions these metros for steady buyer activity as financing conditions ease. By contrast, several coastal markets retain double-digit price-to-income ratios, which limit entry-level activity and skew the transaction mix to higher equity buyers. These wage and price dynamics suggest absorption will be strongest in markets where incomes and home values are converging, especially as the U.S. residential real estate market transitions into a more balanced phase. This supports sustained but measured growth across the 2026–2031 horizon.

Mortgage-Rate Lock-In Suppressing Listings and Mobility

An estimated 80% of mortgage borrowers hold rates below the December 2025 market average, which creates a powerful disincentive to list and repurchase at higher costs. Inventory remains 25% below pre-pandemic norms in many metros, and that tightness keeps prices firm despite slower volumes. The affordability gap for move-up or lateral buyers is material, and it functions as a de facto mobility tax that reduces turnover across age cohorts. Transaction chains that rely on move-down sellers are also affected, which constrains entry-level inventory in popular school districts and established neighborhoods. A durable easing in mortgage rates would alleviate this restraint, and some forecasts project rates closer to the high 5% range by late 2026, which would unlock more listings over time. Until then, the U.S. residential real estate market will contend with structurally low resale supply relative to demand.

Insurance And Climate-Exposure Costs Reducing Affordability

Homeowners insurance premiums increased 21% nationally between 2023 and 2024, and carriers have pulled back from high-risk markets and tightened underwriting, which raises total ownership costs. Florida homeowners now face average annual premiums above USD 6,000, and in some coastal areas, costs reach much higher levels, which can add USD 500 or more per month to housing outlays before taxes and HOA fees. Academic and policy research links rising premiums to elevated default risk and downward price pressure, suggesting insurance inflation can spill into credit performance and valuations. California’s 2025 regulatory pivot, allowing catastrophe modeling and reinsurance costs in filings, aims to stabilize insurer participation, but it also validates double-digit increases in higher-risk zones. FAIR Plan enrollment has surged, and California’s pool exceeded 610,000 policies by mid-2025, which underscores private market stress in exposure-heavy areas. These cost dynamics are a measurable drag on the U.S. residential real estate market, where climate risks are concentrated.

Segment Analysis

By Property Type: Apartments And Condominiums Anchor Urban Density

Apartments and condominiums captured 81.50% of total value in 2025, reflecting strong urban and inner-ring suburban demand that favors maintenance-free living, walkability, and proximity to employment centers. This concentration also mirrors the depth of institutional capital in multifamily formats and the scale benefits associated with professionally managed buildings. Developers are leaning into smaller average unit sizes and amenity-light formats that align with target rents, which supports occupancy and stabilizes absorption even as new deliveries crest in 2025–2026. Detached product remains relevant for family renters, and single-family rental communities have gained traction as a complementary path to meet household formation in growth corridors.

Builder incentives have narrowed the price gap with resales in several Sun Belt metros, which bolsters multifamily competitiveness in new-home communities that share school zones and commute sheds with established neighborhoods. Institutional developers continue to prioritize infill opportunities and transit-served sites in markets with durable job growth and supply constraints, which supports pricing over the forecast period. Zoning reforms that introduce missing-middle formats, including townhomes and small multiplexes, are expanding the attainable housing toolkit in select jurisdictions. These conditions position apartments and condominiums to remain the core of the U.S. residential real estate market through 2031, both as owner-occupied stock and as professionally managed rentals.

Note: Segment shares of all individual segments available upon report purchase

By Business Model: Sales Dominates, Rental Expands Faster

The sales model held 78.55% of total activity in 2025, reflecting the enduring preference for ownership and equity accumulation among households. Lower rates into 2026 should restore some qualification capacity at the margin, which can lift sales volumes as payment-to-income ratios retreat from their 2024 highs. Resale listings remain constrained by lock-in, so builders are capturing incremental share by offering rate buydowns, closing-cost credits, and smaller floor plans to align price points with buyer budgets. The U.S. residential real estate industry is also seeing more co-marketing between builders and lenders to streamline pre-approval and provide certainty of execution for move-up buyers. These factors support the primacy of sales even as rental models scale.

The rental model is projected to grow faster at a 2.29% CAGR through 2031, supported by single-family rental communities and professionally managed multifamily assets that meet lifestyle and mobility preferences. Sun Belt metros that added significant single-family rental supply in 2025 reported slower rent growth as shadow inventory increased, while Northeast and Midwest multifamily markets maintained pricing power amid tighter supply. Institutional ownership remains a minority of total single-family rentals nationwide, which leaves room for continued consolidation and professionalization that can improve operating metrics. As affordability improves, some higher-income renters will convert to ownership, yet rental formats should continue to absorb demand from households prioritizing flexibility and maintenance-free living. These trends together create a durable two-track expansion in the U.S. residential real estate market across sales and rental channels.

By Price Band: Affordable Segment Gains As Mid-Market Holds Volume

The mid-market tier, defined as 80% to 120% of area median values, held the largest share at 48.55% in 2025, supported by a concentration of transactions among first-time buyers, repeat movers, and downsizing households. This band remains the transaction fulcrum in many metros because it aligns most closely with median incomes and standard mortgage underwriting. Builders are addressing price sensitivity with smaller footprints, attached formats, and targeted incentives that reduce initial monthly payments and expand eligibility. The U.S. residential real estate industry has also seen renewed emphasis on attainable townhome clusters and energy-efficient entry-level products supported by local planning reforms. These patterns sustain mid-market volume leadership while affordability constraints gradually ease with rate moderation.

The affordable tier is the fastest-growing price band, with a projected 2.22% CAGR through 2031, reflecting both policy support and builder pivots to reach sub-USD 350,000 price points in secondary markets. By 2024, homes under USD 200,000 accounted for only 6.13% of sales in Florida, which underscores how constrained the low-price inventory became and why the new-build response is central to expanding supply in this tier. Luxury transactions remained resilient into late 2025, with median luxury prices at USD 1.26 million and year-over-year gains of 5.0%, while inventory rose 7.7% as sellers tested demand with stock-market gains supporting down payments and cash purchases. In the middle of the distribution, steady wage growth and slight rate relief are restoring payment-to-income ratios that support mid-market resales, which remain the backbone of transaction activity. Together, these shifts help rebalance the U.S. residential real estate market as builders and policy adapt to affordability realities.

Note: Segment shares of all individual segments available upon report purchase

By Mode of Sale: Secondary Resales Anchor Volume, New-Builds Lead Growth

Secondary resales accounted for 88.44% of transactions in 2025, underpinned by the vast installed base of owner-occupied homes and the desirability of established neighborhoods. Lock-in-induced scarcity kept resale supply below historical norms through 2025, which supported prices even as volumes lagged long-run averages. Builders leveraged incentives and product redesigns to compete on monthly payment, and that helped to narrow the price gap in several metros and spur absorption. Buyers favor modern energy standards and new-home warranties when premiums are minimal, which increases the appeal of primary new-builds in certain corridors. This interplay between scarce resales and competitive new-build financing is shaping the transaction mix across regions in the U.S. residential real estate market.

The U.S. residential real estate market size for primary new-builds is projected to expand at a 2.35% CAGR through 2031, and the fastest gains are in metros where new construction accounts for a larger share of listings. In the South and West, new homes represent a double-digit share of listings and often trade at parity with resales, which drives outperformance in builder communities. In the Northeast and Midwest, where new construction is scarce, premiums for new homes are materially higher because of energy standards and limited land availability. Single-family build-to-rent starts also scaled in 2025, and pre-sale allocations between builders and institutional operators are becoming a consistent pipeline tool in supply-constrained markets. This setup positions primary new-builds as the structural growth engine of the U.S. residential real estate market into 2031.

Geography Analysis

The South held the largest share at 40.77% in 2025, while the West is projected to lead growth at a 2.44% CAGR through 2031 as migration and job diversification continue to reshape demand corridors. In the near term, Sun Belt metros that experienced the fastest pandemic-era gains face inventory normalization and a clearer pricing framework as incentives absorb buyers at higher payments. The U.S. residential real estate market is therefore balancing strong long-run fundamentals in the South and West against near-term corrections in specific metros with rapid supply delivery. Insurance costs remain the key swing factor in parts of Florida, which materially influences payment-to-income ratios and qualification for median earners. Inland Texas metros are set to stabilize faster than coastal Florida because climate-exposed insurance inflation is less pronounced away from the Gulf.

In the West, Phoenix, Las Vegas, and Boise continue to draw in-migration even as inventories normalize from 2024 peaks, and buyers are gaining leverage as more listings come online. California’s coastal metros remain constrained by high price-to-income ratios, and flat rent forecasts reflect the large volume of multifamily completions during 2025 that broadened options for renters. West Coast ADU-friendly policies and Fannie Mae’s 2026 ADU income treatment could add incremental, dispersed rental supply and improve overall affordability in select neighborhoods. As these pieces converge, the U.S. residential real estate market is set for regionally varied but broadly constructive growth through 2031.