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Happy New Year! This month, we take a look back at 2025, and a look ahead at 2026.

2025: A Year In Review

Some pretty interesting things happened in the real estate market last year! First, mortgage rates came down.

We started off the year around 7% for the 30-year fixed mortgage rate, and ended in the low sixes.

Second, we saw price growth cool off nationally and in Florida. However, when we look at the average sales price of residential sales in 2024 versus last year, we did see growth in Tallahassee.

Generally speaking, home prices didn’t go up as much as they have in some more recent years. That's a good thing for people wanting to buy.

Third, inventory grew.

But the question that's on everyone's mind is: What's ahead?

2026 Forecast

Jake Krimmel, Senior Economist at realtor.com, said, “We anticipate affordability will improve modestly, on average, in 2026. This results from our expectations of slightly lower interest rates, only modest increases in home prices and a more balanced market than in recent years.”

So, what affects affordability? Three things – mortgage rates, home prices, and wages.

Mortgage rates are going to kinda bounce around where they are right now.

That could be welcome news to anyone who thinks they might want to wait out the current mortgage rate environment, and it definitely reminds us of the old saying, “When rates go up, they take the escalator. When they come down, they take the stairs.”

Home prices are not expected to rise as quickly – with 14 industry leaders predicting a 1.6% increase in home prices in 2026.

All of this bodes well for affordability. And, the added bonus, is that inventory is also projected to rise by 10%.

This all lends to the projection of a 10% increase in total home sales in 2026.

When it comes to wages, income growth is expected to outpace both inflation and home price growth giving buyers more purchasing power.

realtor.com said, “Even though home prices are expected to go up, affordability is set to improve modestly in 2026.” In fact, the monthly payment to buy the typical home is expected to slip to 29.3% of median income – its first year below the 30% affordability threshold since 2022. Affordability may not be ideal, but it seems to be moving in the right direction.

As always, these outlooks are all affected by local economic conditions. This year will be one of the most geographically divided markets we've seen in a while, so it is important to know what’s going on in your local market. However, overall, both sellers and buyers should see some relief. Mischa Fisher, Chief Economist at Zillow said it best, “Buyers are benefiting from more inventory and improved affordability, while sellers are seeing price stability and more consistent demand. Each group should have a bit more breathing room in 2026.”

Bottom Line

·       Affordability is expected to improve this year

·       Mortgage rates are expected to hover around the current rate

·       Home prices will rise more modestly than they have in recent years

·       Inventory is predicted to increase

·       Wages are forecasted to outpace both inflation and home prices

·       2026 should bring relief to both sellers and buyers for a more balanced market

Tallahassee’s Previous Month’s Statistics