By Kai Ioh | December 2025
After years of pandemic-fueled disruption, the U.S. housing market is entering a new phase. According to the 2026 Compass Housing Market Outlook, we are finally seeing the start of a “rebalancing” moment, one defined by stabilizing prices, improving affordability, and shifting regional momentum.
The report itself is 66 pages, full of insights and trends. I highly recommend reading it if you are curious about the current state of the real estate market and the future trend. In a nutshell, here are four main pillars of the outlook.
Let’s break down what this national reset means for buyers and sellers here in Hawaii—especially along the West(Kona) side, where luxury continues to lead.
Is 2026 the Year of Stability?
Compass forecasts that home prices will remain essentially flat in 2026, with a projected national average of +0.5% appreciation. Inventory is expected to rise 10%, and mortgage rates should hover between 5.9% and 6.9%.
In other words: no crash, no boom, just a long-overdue period of normalization.
For the Big Island, that translates to increased mobility and more realistic pricing in certain segments.
Trend 1: The End of the Lock-In Effect
After years of mortgage rate paralysis, 2026 may finally mark the beginning of more movement, especially in the entry to mid-tier segments. Nationally, 20% of mortgages now carry rates above 6%, meaning more homeowners no longer feel “locked in.” The average outstanding mortgage rate is now at 4.4%.
Here on the Big Island, we’re already seeing signs of this in the condo market. Lower price points are attracting both investors and new residents, with a noticeable uptick in condo demand compared to this time last year. Fewer active listings confirm that buyers are re-engaging.
Trend 2: The end of “The Great Stay”
The labor market remains a powerful anchor. National job data will shape interest rates in 2026, but Hawaii’s local economy has stayed resilient.
In fact, as of September 2025, Hawaii’s seasonally adjusted unemployment rate was just 2.5%, among the lowest in the nation. That kind of economic strength supports both buyer confidence and stable home values.
Affordability will improve gradually as incomes rise faster than prices, not through dramatic correction, but through steady rebalancing.
Trend 3: Divided Geography and Prosperity: Not All of Hawaii Is Lagging
National reports (like those from NAR) may show Hawaii trailing broader recovery trends—but it’s essential to break that down. West Hawaii, led by the luxury segment, continues to perform well.
High-net-worth buyers are still active, particularly from key feeder markets like California, the Pacific Northwest, and even Tokyo. Ultra-luxury homes, when well presented and priced right, are moving.
Divergent economic conditions will continue to shape market behavior unevenly. Additionally, the gap between wealthier households and financially pressured buyers will remain one of the biggest forces shaping the market.
Will Home Prices Drop in 2026?
Nationally, prices may dip slightly in some metros. But in West Hawaii, pricing remains stable, especially in the upper tiers. What we’re seeing is more negotiation room and strategic pricing.
In more affordable segments like condos, price stability is accompanied by better selection, making 2026 a strong year for value-oriented buyers.
Understanding the Language of 2026: Key Terms to Know
If you’re reading or hearing about the market, some keywords will come up again and again, such as K-Shaped Economy, The Great Stay, Lock-In Effect, Frozen Mobility, Shadow Inventory, and Shadow Supply. The Compass 2026 Housing Market Outlook will help you interpret trends with clarity.
All of these concepts play a major role in understanding what’s happening now and what’s likely to happen next.
Final Thoughts: Navigating a New Era
This market rewards local knowledge. National averages paint in broad strokes. But in Kona, Kohanaiki, Hualalai, Mauna Lani, and Mauna Kea—every micro-market tells a unique story.
Want to know what 2026 means for your property or your search? Let’s connect. A more balanced, opportunity-rich market is here—and it could be the perfect time to take the next step.
You can also explore the full Compass 2026 Housing Market Outlook here:
👉 https://www.compass.com/research/market-outlook/agents/kai-ioh/