The energy prices impact on housing is becoming more visible as rising costs reshape expectations for home sales in 2026. While earlier forecasts pointed to modest recovery, new economic pressures are forcing analysts to rethink how affordability, mortgage rates and consumer confidence will evolve.

At the start of the year, economists expected a gradual improvement in home sales after a prolonged slowdown. However, the energy prices impact—driven by geopolitical tensions and oil market volatility—has introduced new uncertainty. Updated projections from Zillow now outline several scenarios that depend heavily on inflation trends and borrowing costs.

Rising costs reshape affordability

One of the most immediate effects of the energy prices impact is on affordability. Mortgage rates have climbed roughly 50 basis points from earlier lows, reducing the gains buyers experienced when rates briefly dipped below 6%. As a result, many households are finding it harder to enter the market.

Additionally, affordability remains below historical norms, and buyer demand has already started to soften. Recent data indicates a decline in mortgage applications, signaling that higher costs are discouraging potential buyers from making purchases.

Mortgage rates remain a key factor

Looking ahead, mortgage rates are expected to fluctuate, with projections averaging around 6.5%. However, the energy prices impact could push rates even higher if inflation persists. Conversely, a temporary drop in rates might create a short window for increased activity.

At present, borrowing costs remain elevated, with daily averages continuing to rise. Therefore, even small changes in rates can significantly influence buyer behavior and overall market momentum.

Employment adds another layer of risk

Beyond borrowing costs, the labor market is another critical variable. Analysts expect unemployment to remain relatively stable, but the energy prices impact could weaken job growth if higher costs reduce consumer spending.

Although early data has been mixed, any sustained increase in unemployment would likely reduce demand for housing. In contrast, stable employment could help offset some of the negative pressure from higher mortgage rates.

Different scenarios for home sales

Forecast models now present a range of possible outcomes. In a best-case scenario, both mortgage rates and unemployment stabilize by early May, allowing home sales to rise modestly. Even then, growth would fall short of earlier expectations.

If economic pressures persist into the summer, gains could shrink further. Moreover, if the energy prices impact continues throughout the year, home sales could decline slightly compared to the previous year, reversing anticipated progress.

A fragile market outlook

Ultimately, the housing market remains highly sensitive to external shocks. While supply and demand fundamentals still matter, broader economic forces are playing a larger role. The energy prices impact has highlighted how quickly market conditions can shift.

As a result, buyers and sellers alike are navigating a more uncertain environment. Until inflation stabilizes and borrowing costs ease, the path forward for home sales will likely remain uneven.