Will 2026 be a Good Year for 1031 Exchanges?

While the real estate landscape has shown improvement, economic volatility means those considering like-kind exchanges ought to weigh other considerations instead of attempting to time the market.

After a tumultuous few years, the real estate market seemed poised to rebound in 2025. But the effects of tariffs, interest rate cuts, and the One Big Beautiful Bill Act are only just starting to be seen, so it’s tough to know whether 2026 will bring a healthy market for owners of business & investment property hoping to execute Section 1031 like-kind exchanges. Some have been putting off exchanges, waiting to see how things shake out, and want to know whether they should act now or wait.

We took a look at the information that’s out there to see what analysts and experts think about the health of the property market heading into 2026. Here’s what industry projections may indicate for those entering retirement and others considering exchanges in 2026.

What is the outlook for the real estate market in 2026?

Commercial real estate outlook for 2026

The overall word on the commercial real estate market heading into 2026 is caution. While things have steadily improved since the pandemic, the realities of work-from-home culture, the slow conversion of retail and office spaces, and supply chain issues have meant gradual progress.

Several 2025 events could increase investment in real estate, including a recent Fed rate cut, with more rate cuts anticipated in the next year, and an executive order on 401(k) investing in private markets that Deloitte estimates could unlock $12 trillion in capital. International capital may also drive deal volume and prices upward, with Deloitte noting that “the United States remains the top source of outbound global investment capital, with activity in the first quarter of 2025 returning numbers slightly ahead of the five-year average.”

Other reports have looked favorably on the prospects of the commercial market, particularly in cities, where “Class A office leasing in central business districts (CBDs) has rebounded to its historical 41% market share,” according to Cushman & Wakefield. But as Forbes cautions, if businesses “continue to embrace hybrid work in ways that reduce their office footprints, demand will likely remain uneven. Rate cuts can make deals pencil out, but they can’t create tenants where there aren’t any.” With fewer potential tenants, high-end amenities will be more valuable than ever as companies seek to entice workers back to the office.

When the time is right, capital will be available: CRE Daily says, “$350B in dry powder is waiting on the sidelines, with pressure to deploy mounting.” Individual and institutional investors may have more capital to invest thanks to the OBBBA, but it’s unclear whether that will translate into substantial activity in a sector that has had a rough few years.

Residential real estate outlook for 2026

While residential real estate suffered some of the same pandemic and supply chain woes as the commercial sector, demand (especially for single-family homes) remained strong. 2025 saw a slight dip, with the typical home spending “62 days on the market in September 2025 — a full week longer than this time last year.” Prices have declined in 33 of the nation’s 50 largest metro areas, meaning the choice of whether to sell a property now or wait for the future may depend greatly on location.

Yahoo notes that “many current homeowners are still reluctant to give up the 3% mortgage rates they secured early on in the pandemic.” If a property was secured with a low interest rate, it may be easier to earn a profit through rental, and therefore easier to wait for the right market, than if it was purchased at a higher interest rate. Fannie Mae predicts “mortgage rates to end 2025 and 2026 at 6.4 percent and 5.9 percent, respectively,” which could mean that if one were performing a 1031 exchange with a property involving debt, waiting a year could result in a much better interest rate.

With lower rates, the number of home sales is expected to rise, with one estimate predicting “overall home sales — new and existing — will be 9.2% higher at the end of 2026 compared to the end of 2025,” while “existing home sales are expected to be at an annualized rate of 4.446 million at the end of 2026, up 9.6% compared to forecasts for the end of this year.”

Looking long-term, TD Economics expects sales “to rise by 5% in 2026 followed by another 10% in 2027,” but points out that the housing market, like other parts of the economy, remains uncertain “in the face of significant policy shifts under the new administration. From tariffs to government cutbacks, many households are feeling a lot less secure about their economic prospects.” Buyers and sellers of real estate would be wise not to bet too strongly on predictions that could quickly be rendered obsolete by policy changes.

Will home prices rise or fall in 2026?

These larger trends are important for those poised to make many acquisitions and sales in the coming years, but what about smaller-scale investors who may only own a lone single-family rental property? Will increased activity be enough to raise prices? Will there be more buyers a year from now, making the wait worth it?

Keeping Current Matters predicts that prices should go up, albeit modestly: “With rates down from their peak earlier this year, more buyers will re-enter the market. And that increased demand will keep some upward pressure on prices nationally – and prevent prices from tumbling down.” While it’s not guaranteed that prices will go up, having less worry that they might sharply decline can give 1031 investors more time to explore their options.

According to the Associated Press, rentals and other investment properties are becoming a larger part of the real estate market: in 2025, “nearly 27% of all homes sold in the first three months of the year were bought by investors,” accounting for “roughly 20% of the nation’s 86 million single-family homes.” While this may make one think of real estate funds and large institutional investors, the truth is that “mom-and-pop investors, or those who own between 1 and 5 homes, account for 85% of all investor-owned residential properties.”

If institutional investors increase or decrease their investments in residential properties in the near future, this could surely affect the market. But the majority of residential investors don’t operate at that scale. For these investors, many of whom may be investing via 1031 exchange, selling when the market is most active or when prices are highest may not be the number-one consideration.

Americans transitioning to retirement in 2026

One statistic you won’t see in most studies of the real estate market is the average age of property owners. Why does this matter? Because according to an article from the Georgetown University McCourt School of Public Policy, “As a nation, we are getting older and a higher percentage of the population will be entering retirement years. The U.S. median age rose from 35.3 on April 1, 2000, to 37.9 on July 1, 2016.”

Other estimates fall along similar lines, with Yahoo Finance predicting “about 12% more people will turn 65 each year for the next four years vs. the previous 10,” and concluding that while it’s impossible to know when each of these people will actually retire, based on the data, “you could make an educated guess that around 6.3 million Americans a year will retire over the next four years.”

When property owners retire, they often choose to sell businesses or investment properties, and not just because of financial considerations. They may want to exchange into new properties based on location, level of maintenance required, and the ability to hold a property for the rest of their lives in order to allow their heirs to take advantage of the step up in basis that occurs upon death.

Owners of rental properties have another consideration, which is the rising cost of home ownership. According to U.S. News & World Report, “With rising costs for utilities, maintenance, insurance and property taxes, the total costs for homeownership are far more than just mortgage principal and interest payments alone. According to a mid-2025 update by Bankrate, these extra costs for a single-family home add an average $21,400 per year, or $1,783 per month – up 18% from $1,510 just one year ago.”

Holding even a single investment property, if it’s an actively-managed residential home, can be time-consuming, costly, and burdensome for retirees who are hoping to wind down their business activities in their golden years. That’s when Delaware Statutory Trusts can offer a real advantage, as they provide passive income and professional management while also being eligible for 1031 exchanges so property owners can achieve full tax deferral.

Since DSTs have long been seen as a safe bet during times of economic uncertainty, the growing number of retirees could look to DSTs as a way to continue investing and deferring taxes while also generating income without the labor of maintaining a property.

As a panelist explained at a 2024 JTC webinar, “A lot of landlords just come to the place where they’re done with managing tenants,” but unfortunately, many end up paying taxes because “they don’t know their options.” DSTs can help alleviate the labor of property ownership while also simplify estate planning, allowing retirees to keep more of the equity they’ve worked hard to build.

“DSTs have become a popular alternative for investors looking to passively defer their capital gains through a 1031 exchange,” said JTC Senior Manager – ICS Justin Amos. “And more institutional REIT sponsors continue to enter the space, viewing 1031 exchanges as a valuable way to source capital from accredited investors and diversify their portfolio of offerings.”

DSTs continue to show growth as an industry, having already surpassed last year’s total raise of $5.66 billion. The sector is expected to meet Mountain Dell’s forecast of $7.5 billion by the end of 2025. This reliable growth is why JTC has aligned with experts in the space to develop solutions engineered to service the specific needs of the industry.

Should I perform a 1031 exchange now or wait until 2026?

As mentioned, home prices, market activity, and macroeconomic/sociopolitical conditions are but a few of the many considerations property owners must take into account when deciding whether to perform an exchange. For those reaching retirement age, the choice to transition may be simpler because they simply don’t want to wait to retire.

The same is true for those who’ve found a property they want to buy. You don’t want to lose out on a property that may not be there in three months (let alone a year), so now may be the time to act. Based on the general opinions we’ve seen from around the industry, there is a chance this time next year might bring better conditions, but it isn’t likely to be drastically better or worse, barring major unforeseen economic or policy changes.

“The future of like-kind exchanges looks strong,” said Nicole Vella, JTC Manager – Client Services, ICS. “The One Big Beautiful Bill Act kept the tax benefit in place, which is huge for individual and commercial investors.” As for whether Section 1031 could be repealed in the future, Vella sees this as unlikely.

“There are generally talks about repealing the tax benefit come election time, but historically, no repeals have come to fruition,” she said. “IRC Section 1031 is integral to the real estate market. Like-kind exchanges keep the economy moving and allow investors to establish generational wealth.”

Regardless of how you think the market might change over the next year, it’s never a good idea to rush into a transaction. Proper due diligence is a must, as is understanding your options when it comes to selecting replacement properties or even acquiring the replacement property first through a reverse exchange.

One of the most common mistakes exchangers make is to sell their relinquished property before retaining a Qualified Intermediary (QI). Not only can this lead to a failed exchange, it can also lead to executing the wrong type of exchange and making things much harder than they need to be. To achieve full tax deferral, avoid a boot, and set yourself up for success, work with a QI like JTC from the very beginning, before you make the decision to sell. Our advanced technology platform, expertise in complex exchange types, and streamlined services can help property owners find a way to execute their tax deferral strategies, no matter what happens with the market.