Lower interest rates are helping ease the burden of high home prices, but the housing market remains challenging for buyers. Existing home sales rose by 5.1% in December, the highest level in three years, thanks to declining mortgage rates since last fall.
The year 2025 was considered difficult for buyers due to inflated home prices, but falling interest rates and slower price growth in the final quarter have begun to improve conditions.
The average 30-year fixed mortgage rate dropped to 6.19% in December compared to 7% at the beginning of the year, providing buyers with noticeable monthly savings. The National Association of Realtors expects mortgage rates to reach 6% in 2026, which could bring 5.5 million new households into the pool of potential buyers.
Although inventory fell by 18% in December compared to November, supply is still higher than last year. However, limited options remain a major challenge. With improvements in inventory expected by February, home prices are likely to stay high, especially as the pace of price growth has slowed slightly to 0.4%.
Despite these relatively improved conditions, a large share of buyers have postponed their home-purchase plans due to economic uncertainty, with broader market activity expected once interest rates and prices decline further in the near future.
