Following a brief period of optimism in early 2025, distressed real estate auction buyers have adopted a bearish outlook for 2026. Record shares of these investors are now expecting declines in both home prices and rents across their local target markets.
According to Auction.com’s 2026 Buyer Outlook Report, 43% of auction buyers anticipate home prices in their local markets to decrease this year. This marks the highest level recorded since the company began conducting the survey in 2022. Concurrently, 31% of respondents forecast declining rental rates, representing another high for the annual survey.
These projections carry weight due to the nature of the buyers surveyed. Daren Blomquist, vice president of market economics at Auction.com, noted that auction buyers are primarily local community developers whose success relies on accurately predicting conditions three to six months in advance to accommodate renovation timelines — making them a solid barometer for assessing local conditions.
“Their sentiment toward the market is an important indicator of what to expect in the rest of 2026,” Blomquist told Scotsman Guide.
Despite this pessimistic pricing forecast, buyers are seeing distinct silver linings regarding housing affordability. A record-low 36% of buyers described their local markets as “overvalued with a correction possible,” per the survey. This represents a notable drop from 43% a year ago and 55% in 2022.
“Local community developers buying at auction expect a slow-motion housing correction to continue in 2026,” commented Auction.com CEO Jason Allnutt in the report. “The silver lining is they are also reporting improved affordability in an increasing number of local markets.”
Blomquist explained that this record-low share of buyers describing their market as overvalued indicates that “much of the air has been taken out of the home price bubble that developed during the pandemic housing boom.”
While this makes markets feel more affordable and less prone to a severe crash, Blomquist told Scotsman Guide that buyers “still think there is more air to come out of the bubble.”
Even with improving fundamentals and easing valuations, the appetite for rapid portfolio expansion has cooled slightly. While 59% of buyers still plan to increase their property purchases in 2026, this figure is down from previous years and represents the lowest share since 2023.
Still, an overwhelming 92% of overall buyers expect their purchasing volume to either increase or remain the same compared to 2025. Buyers who primarily renovate and rent out properties were the most likely to expect their purchase volume to increase or hold steady (94%), followed closely by investors who renovate and resell to owner-occupants (93%).
Investors pointed to familiar challenges when assessing barriers to acquisition. More than half of all buyers surveyed cited a lack of well-priced inventory as their primary hurdle to purchasing more properties.
Because of this, Blomquist urged mortgage servicers and government agencies — the primary sellers of foreclosed homes and bank-owned properties — to pay close attention to these sluggish market trends.
“Just as home builders have adjusted prices lower and made concessions” to sell properties and protect their margins, “mortgage servicers and government agencies in this housing market should consider strategically adjusting pricing lower to mitigate against bigger losses down the road,” he said.
