2025 Trends and 2026 Possibilities
Looking back at housing industry conditions through 2025, many aspects suggest a continuation of values we saw in 2024: new technologies, increased livability and concern for affordability. Even with recent and anticipated Federal Reserve interest rate cuts, homeownership remains unaffordable for many Americans. Fluctuating trade policy, incomplete economic data and an extended government shutdown have fostered continued uncertainty, leading potential home buyers to pause and rethink their investment.
Affordability challenges have plagued the housing industry for nearly two decades, pushing designers to study new applications for tested strategies to help offset costs: reduced parking, smaller home sizes, efficient design and cost-effective construction. All play an important role in lowering home prices and often a combined approach is needed. In some instances, even that does not resolve the issue.
Widespread economic challenges have led many architects and builders in the direction of offsite construction. Whether robotically constructed panels or fully-finished modules, offsite construction helps builders manage labor costs, construction timelines and material waste. New technologies have made offsite strategies more efficient while also allowing greater design flexibility. According to the Modular Building Institute, the modular construction market in the United States reached $20.3 billion in 2024. With an estimated compound annual growth rate of 4.5 percent, the market is expected to reach $25.4 billion by 2029. This growth outpaces the rest of the construction industry, demonstrating builder confidence in these innovative approaches.
Beyond physical construction costs, a 2021 study by the National Association of Home Builders identified that nearly 25 percent of newly constructed homes’ final sales prices were tied to regulatory costs: zoning, approvals, permitting, delays and more. While these often difficult to quantify limitations are necessary for safety, they also provide another avenue for potential cost savings. For example, building codes throughout most of the country have typically not allowed single-stair multifamily buildings, with exceptions in Seattle, New York and Honolulu. With modernization of fire safety techniques, 19 states and Washington, DC, have introduced updates and inquiries toward expanding single-stair multifamily construction. Seven states passed legislation to this effect in 2025 alone. This change reduces direct construction costs through stair elimination and makes multifamily construction possible on lots once deemed too small. This is a small example of how policy can reduce housing costs. By expanding the housing types allowed under zoning and building code while studying new methods for maintaining occupant safety, previously prohibited possibilities are open again.
Of the many pandemic trends influencing home design, the thoughtful use of outdoor spaces and their connections to indoor spaces remains a top priority for home buyers. Overall home sizes may be trending downward, but smart use of outdoor space can offset smaller indoor areas, benefiting functionality as an extension of interior rooms. Rather than large open yards, buyers seek outdoor cooking and eating areas, California rooms and roof decks that can host gatherings. In parallel, consumer focus on wellness further drives the inside-outside connection.
As homeowners look to stay in their homes longer than they did in the past, considerations for flexibility and aging-in-place take center stage. While life often brings unexpected opportunities and the average homebuyer only stays in their home for eight years, buyers typically plan on staying for 15 years or more. Flexible, multi-functional spaces allow homes to adapt as families grow and evolve. Demand for primary-down suites is further fueled by a rise of multigenerational households. Even when buyers anticipate shorter stays in their homes, the mortgage rate dip of the early 2020s showed us how plans can adjust as circumstances change.
Perhaps no topic has infiltrated housing industry discussions throughout 2025 more than artificial intelligence. Clearly on everyone’s minds, AI continues to expand into design and documentation processes, as well as project management, sustainability and robotic construction. Some express excitement about the possibilities, while others postpone exploration, hoping AI will fade to the background. But AI is here to stay, in ways big and small and remaining open to possibilities will expand our future opportunities.
So what’s next? Unlikely to experience a radical departure from the current housing market, 2026 will likely see more policy pushback and more AI growth, all with the loftier goal of bringing down costs and reaching a broader home buying audience. Whether homeowners stay in their homes for two years or 20, the magnitude of today’s homeownership investment makes these decisions highly significant and homebuyers ultimately need to feel value in their purchase.
By Marissa Kasdan. She is the director of research and development at KTGY. She may be reached at mkasdan@ktgy.com.
