2026 Real Estate Outlook: Will Lower Interest Rates Revive Move-Up Buyers and Benefit First-Time Homebuyers

The real estate market has faced significant challenges over the past few years, especially for move-up buyers and first-time homebuyers. Many move-up buyers have been unable to sell their current homes and purchase larger properties due to rising interest rates and limited inventory. First-time buyers, meanwhile, have often found the market too competitive and expensive to enter. Looking ahead to 2026, there is reason for optimism. Changes in interest rates, influenced by political and economic factors, could unlock movement in the market, benefiting both groups and stabilizing prices.

This article explores the data behind this outlook, focusing on national trends and local insights from the western suburbs of Chicago, including Glen Ellyn and DuPage County real estate markets.

Interest Rates and Their Impact on Move-Up Buyers

Since 2020, mortgage interest rates have fluctuated significantly. After historic lows near 3% during the pandemic, rates climbed sharply in 2022 and 2023, reaching around 7% by late 2023. This rise created a bottleneck for move-up buyers who locked in mortgages at approximately 3.5% and have been reluctant to sell and buy at higher rates. According to the Mortgage Bankers Association, the average 30-year fixed mortgage rate was 3.5% in early 2021 but rose to 6.9% by the end of 2023.

President Trump has publicly pressured the Federal Reserve to lower interest rates, advocating for levels closer to 4%. He has indicated intentions to appoint a Fed chairman who would pursue this goal. Economists estimate that an equilibrium rate for move-up buyers to feel comfortable selling and buying is between 5% and 6%. At this range, monthly payments become more manageable, encouraging homeowners to make the move they have postponed for years.

If the Fed lowers rates to this target range by 2026, move-up buyers will likely re-enter the market in force. This movement will increase inventory as these sellers list their homes, creating more opportunities for first-time buyers.

First-Time Homebuyers and Inventory Dynamics

First-time homebuyers have struggled with limited inventory and high prices. The National Association of Realtors reported that in 2023, first-time buyers accounted for only 29% of home sales, down from 34% in 2019. Many have paused their search due to fierce competition and affordability issues.

With move-up buyers selling, inventory should increase, easing pressure on prices. While the market will remain competitive, it will not be as intense as the past three years. More homes on the market mean first-time buyers will find better options and potentially more affordable prices.

The economic outlook suggests that steady prices combined with lower rates will create a healthier market balance. This scenario benefits sellers who want to move up and buyers entering the market for the first time.

Local Trends in the Western Suburbs of Chicago

The western suburbs of Chicago, including Glen Ellyn and DuPage County real estate markets, have remained desirable despite national fluctuations. Data from the Chicago Association of Realtors shows that from 2019 to 2025, the western suburbs experienced a net population increase, while the city of Chicago saw a modest decline.

Between 2014 and 2019, moving rates favored the city, but since 2019, the trend reversed. More people have moved from the city to suburbs like Glen Ellyn, attracted by larger homes, better schools, and more green space. This migration has contributed to an inventory deficit in these suburbs, keeping prices stable or rising slightly.

In 2023, Glen Ellyn's median home price was approximately $420,000, up 5% from 2022, while inventory remained tight with less than two months of supply. DuPage County overall showed similar trends, with steady demand and limited homes available.

This local data supports the idea that move-up buyers in these areas are eager to make their next move once rates become more favorable. The continued appeal of the western suburbs will likely sustain a sellers market but with more balanced conditions.

What Buyers and Sellers Should Expect in 2026

• Move-up buyers will find it easier to sell their current homes and purchase larger properties if mortgage rates drop to the 5-6% range. This shift will unlock pent-up demand.

• First-time buyers will benefit from increased inventory and less competition, making homeownership more accessible.

• Sellers will still enjoy a favorable market but should expect prices to stabilize rather than skyrocket.

• Western suburbs like Glen Ellyn and DuPage County will continue to attract buyers seeking space and quality of life, maintaining strong demand.

  
  

Final Thoughts

The 2026 real estate outlook points to a more balanced market driven by anticipated lower interest rates and shifting buyer behavior. Move-up buyers who have been stuck at low mortgage rates will likely re-enter the market, increasing inventory and easing pressure on prices. First-time homebuyers will find renewed opportunities as more homes become available.

For those interested in Glen Ellyn real estate or DuPage County real estate, this could be an ideal time to plan a move. Staying informed about interest rate trends and local market conditions will help buyers and sellers make confident decisions.

If you are considering buying or selling in the western suburbs, now is a good time to connect with a local real estate expert who understands these evolving dynamics and can guide you through the process.