Lima One Capital Releases Its 2026 Housing Market Overview

Lima One Capital has released its 2026 Housing Market Overview, a whitepaper that compiles projections and analysis from leading housing and economic sources to assess what real estate investors may encounter in the coming year.

The report covers mortgage rates, home prices, housing inventory, rental trends, fix-and-flip performance, and construction outlook, offering a broad macro snapshot for investors operating in today’s higher-rate environment.

Mortgage Rates: A Higher-for-Longer Landscape

Mortgage rates remained above 6% throughout 2025, contributing to slower refinance activity and continued affordability constraints.

Looking ahead, projections referenced in the report place unemployment near 4.2% and inflation around 2.4% in 2026. In that context, substantial rate cuts may be limited in the near term, potentially keeping mortgage rates close to current levels unless broader economic conditions change.

Home Prices: Measured Appreciation

Home prices appreciated at a modest 2–3% pace in 2025. For 2026, forecasts cited in the whitepaper range between approximately 1.2% and 4%, depending on the source.

This range suggests continued appreciation, though at a more moderate and sustainable pace compared to the accelerated growth seen in previous cycles.

Housing Inventory: Toward a More Balanced Market

Inventory levels hovered between four and five months of supply in 2025, a level historically considered balanced.

New construction inventory ended the year closer to seven months of supply, which may create more competitive selling conditions in certain markets, particularly for builders completing new projects.

Rental Trends: Steady but Incremental Growth

Occupancy rates remain elevated, near 94%, above long-term historical averages. Rent growth is projected between 1% and 3% in 2026, pointing to incremental expansion rather than rapid acceleration across most rental markets.

Fix and Flip: Margin Compression

The fix-and-flip segment has slowed over the past two years. In Q3 2025, average profit margins declined to roughly 23%, the lowest level since 2008, while median gross profits fell below $60,000.

At the same time, foreclosure activity has begun to rise modestly year over year, though levels remain below pre-pandemic benchmarks. The report suggests that distressed inventory may gradually reintroduce selective opportunities in certain markets.

Construction Trends: Costs Remain a Factor

Material prices rose in 2025, and labor costs continued to increase at a higher rate. Housing starts are projected to remain relatively consistent in 2026, signaling ongoing development activity despite tighter margins and cautious builder sentiment.

Overall, Lima One Capital’s 2026 outlook reflects a market characterized by stability, tighter margins, and the need for disciplined execution.

The full whitepaper includes detailed charts, projections, and source references and is available directly through Lima One Capital.

Download the Whitepaper