Flooring executives wishing for sub-6% mortgage rates in order to unlock the stagnant housing market may have to wait a bit longer as Realtor.com predicts rates will average above 6% throughout 2026.
In releasing its housing forecast for 2026, Realtor.com did offer one piece of positive news: affordability will improve modestly as the typical monthly payment falls below 30% of a household’s income for the first time since 2022.
Last year at this time Realtor.com forecast 2025 mortgage rates would remain above 6%, closing the year at an average of 6.2%. That forecast has proven to be accurate through early December. On Dec. 10, Bankrate reported the average 30-year fixed mortgage rate at approximately 6.26%.
For 2026, Realtor.com predicts mortgage rates will average 6.3%, well above the 4% historic average recorded from 2013 to 2019. Nationally, it forecasts home prices will grow 2.2% through the end of next year, after rising by 2% in 2025. Incomes and overall inflation are expected to continue rising faster than growth in home prices, delivering a slight boost to affordability.
Existing home sales, a key metric for the flooring industry, should climb about 1.7% to 4.13 million, according to the report. However, even with this modest rebound, existing home sales will remain well below normal as high prices and financing costs continue to hold back demand.
As has been the case for at least the last two years, the mortgage rate lock-in effect has dis-incentivized many homeowners from moving. In fact, recent data showed that four out of five homeowners with a mortgage has a rate below 6%. As a result, turnover will be limited with moves likely to be spurred by life necessities such as job or family changes, according to Realtor.com.
Industry reaction
While obviously not thrilled with the forecast, retailers and distributors can read the tea leaves as they acknowledge that 2026 may be negatively impacted by the lofty interest rates and its effect on the housing market—at least for the first half. Still, they remain resolute in believing brighter days are ahead.
“Current forecasts suggest interest rates will stay above 6% in 2026, so we expect the first half of the year to look a lot like what we’re seeing now,” Bruce Odette, president of Denver-based Carpet Exchange, told FCNews. “The second half, however, could open up as pent-up demand starts to show. To make sure we keep moving forward, we’re taking an aggressive approach with more advertising and promotions to drive growth throughout 2026.”
While acknowledging Realtor.com’s strong track record for housing forecasts, some distributor executives are confident mortgage rates will fall next year. “With a new Fed chairman coming in and with 2026 being an election year, I foresee the mortgage rate dropping to under 6%, especially in the second half of 2026,” said Steve Kleinhans, president of Big D Flooring Supply in Phoenix. “Psychologically, a mortgage rate decrease to under 6% will improve the resale and new home markets. I think a high 5% rate could stimulate people to buy new homes or to move up from the homes they have been living in.”
Some retailers are taking a glass-half-full approach with regard to the year ahead. “We are optimistic in general for 2026,” said Pete Rubando, president of Giant Floor, Scranton, Pa. “Our builder business is limited to a handful of custom builders who are all still busy. Hopefully we get some downward momentum with rates that will spur more existing home sales and will increase inventory.”
Others suggest the long-awaited recovery may take a bit longer. “Overall, we believe 2026 will be similar to 2025 in terms of market conditions,” said David Whitehurst, executive vice president of Adleta, a Carrollton, Texas-based distributor. “We may get some help if the rates do come down but also believe 2027 would be the year with better upside. As a side note, we are in markets where people are moving into, so typically we outperform the majority of other markets.”
Rather than wait for improving conditions, some dealers say the best approach is to seize market opportunities now. “We’ve heard for multiple years now that the year will start off flat and pick up in the second half of the year—we’re still waiting,” said Adam Joss, owner of The Vertical Connection Carpet One, Columbia, Md. “Perhaps the year ahead will be different. Personally, we plan to take the steps we need to take to drive growth regardless of what happens in the broader industry. That’s the mindset our team has always had. We can’t wait for the tide to rise.”
Brett Hemphill, owner of Hemphill’s Rugs & Carpets, Costa Mesa, Calif., took a different approach, saying it’s all a matter of perspective when viewing current housing interest rates. “I think we have an issue where we enjoyed such low rates for so many years that it became expected,” he explained. “Historically, 6% is not a bad rate.”
