2026 Housing Market Outlook

Entering 2026, we feel optimistic about the deal prospects for the window and door industry, despite tempered volume in the broader mergers and acquisitions market. Demand for high-quality companies is as strong as it’s been in many years, with indicators suggesting momentum is building: 

• Buyers have a healthy appetite for building products assets with the capital to transact. This is perhaps most notable in the aggressive posture of large strategic buyers in 2025, as evidenced by the execution of several marquee multi-billion dollar deals in the residential building products market (Azek, Beacon and Foundation Building Materials among the targets) at frothy valuations. Within the window and door market specifically, Pella’s acquisition of Weather Shield in July 2025 demonstrates equally strong demand in the middle market. 
• Backed by more than $2 trillion in buying power, private equity funds need to put capital to work and are paying up for the highest quality companies in today’s competitive market. Fragmentation is a cornerstone of private equity buy-and-build strategies, making the fundamentals of the window and door sector attractive for tuck-in and new platform activity. Graycliff Partners’ acquisition of Vytex in September formed a new platform in high-performance vinyl windows and patio doors within the repair and renovation market. At the transaction announcement, Graycliff stated its intentions to pursue organic and inorganic growth eyeing customer, product and geographic expansion. 

Driving demand and the return of buyers to M&A is not due to today’s sluggish housing market, but rather the long-term thesis for the industry, grounded in the nation’s critical undersupply of housing, the expected continued downward trajectory in interest rates, and regulatory incentives aimed at stimulating building activity. Realtor.com estimates the U.S. housing supply gap stood at 3.8 million homes in 2024—a  gap that the organization estimates will take 7.5 years to fix if construction levels continue at current rates.

In October, the Senate passed the ROAD to Housing Act with backers U.S. Senator Tim Scott (R-SC) and U.S. Senator Elizabeth Warren (D-MA) calling the bipartisan bill “landmark legislation” that as “…the first of its kind in more than a decade—takes important steps to boost the nation’s housing supply, improve housing affordability, and increase oversight and efficiency of federal regulators and housing programs,” say Scott and Warren in a statement. 

Buddy Hughes, chairman of the board of the National Association of Home Builders, applauded the bipartisan housing package, saying, “Building more homes is the only way to ease America’s housing affordability crisis, and the ROAD to Housing Act includes favorable provisions aimed at zoning and land-use policies, rural housing, and multifamily housing that will stimulate construction of sorely needed housing.”

Ultimately, it is housing affordability that is keeping the market from experiencing a long overdue revival. We break down the key components of affordability and our outlook for each. 

Interest Rates. We expect additional rate cuts in the coming months, which should continue to put downward pressure on mortgage rates. As of this writing, the Federal Reserve delivered two rate cuts in September and October, bringing the federal funds rate to 3.75% to 4.00% with one remaining meeting in December. Mortgage rates have decreased to 6.24%—the lowest level in over a year, Freddie Mac. 

“This return to monetary policy easing will help the mortgage market indirectly and lead to lower interest rates for building and land development loans, which will help builders boost housing production,” says NAHB Chief Economist Robert Dietz. 

Lack of Inventory. The housing supply shortage is interest rate-driven. Lower mortgage rates should significantly reduce the “lock-in effect,” encouraging more sellers to come to market. September existing home sales rose to a seven-month high, according to data from the National Association of Realtors. “As anticipated, falling mortgage rates are lifting home sales,” says NAR Chief Economist Lawrence Yun. “Improving housing affordability is also contributing to the increase in sales.” 

“To the extent that lower rates can revitalize existing home sales, it will be a positive for U.S. housing,” says Ryan Marshall, CEO of PulteGroup, in the company’s third fiscal quarter earnings call. Easing mortgage rates will contribute in part to a jump in existing home sales in 2026—14.0% according to NAR’s Yun—who delivered NAR’s housing outlook to attendees at NAR’s NXT in November. 

Material and Labor Costs. Input costs will continue to be a challenge heading in 2026, particularly in the evolving tariff environment and with ongoing labor shortages. As builders struggle to absorb rising material input costs as well as a reduced supply of labor, pressure on internal margins may force them to pass along these costs to consumers. Ryan Marshall warned against rising material costs in PulteGroup’s earnings call, indicating tariffs could lead to higher build costs starting in 2026. Labor shortages are a direct result of immigration policies, leading home builders to seek higher cost substitutes to complete construction.

Despite an ever-changing landscape, we are optimistic regarding the 2026 outlook. While uncertainty today surrounding the timing of a housing rebound is leading investors to focus only on the top performers, when the housing recovery does occur, we expect a large number of transactions to enter the market. We anticipate financial sponsors to be among the sellers; those contending with extended hold periods on assets—some averaging five years or longer—will be under pressure from limited partners to return capital driving portfolio exits. Demand for high-quality companies will continue to remain strong. We think housing affordability dynamics will continue to improve and should result in overall transaction volume levels picking up in the building products M&A market.