- - There are glimmers of hope in the housing market

Hannah ParkerDecember 31, 2025 at 2:00 AM

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A home for sale in Los Angeles in 2024. (Patrick T. Fallon / AFP via Getty Images file)

Homebuyers are starting to see signs of relief, and the momentum could roll into next year.

While 2025 has been more of a “balancing year” for the housing market, “2026 will be better for buyers,” Realtor.com senior economist Joel Berner told NBC News.

This shift in the market is in part due to a drop in mortgage rates and softening home price growth, he said.

The 30-year fixed-rate mortgage is currently 6.18%, according to Freddie Mac, a notable decline compared to the high rate of 7% from earlier this year. Although current rates are still significantly higher than those buyers experienced during the pandemic, Berner said he’s seen a pickup in activity.

He also said buyers won’t see rates as low as 3% or 4% next year, but a drop below 6% is “definitely in the realm of possibility.” Buyers haven’t seen rates below 6% since September 2022, according to Freddie Mac data.

Even with sliding rates, however, potential first-time buyers are still struggling to afford a home. And as prices have picked up over the years, so has the median age to buy one. According to a November report from the National Association of Realtors, the median age for first-time buyers is 40, an “all-time high.” NBC News’ Home Buyer Index also shows that conditions remain difficult, even if the gauge is down from recent highs.

Yet sales are picking up, and home price growth has been slowing down, too.

The S&P Cotality Case-Shiller U.S. National Home Price Index, which tracks home prices across the country, on Tuesday reported a 1.4% annual gain for October. This nearly matches gains from September’s index, indicating stagnant growth in home prices.

“Would-be buyers are facing the highest borrowing costs in decades, and that affordability squeeze has curbed demand enough to erode price momentum across most of the country,” Nicholas Godec, head of fixed income tradables and commodities at S&P Dow Jones Indices, said in a release.

Even with dropping mortgage rates and cooling home price growth, an uncertain economy marked by a shaky job market and stubborn inflation could scare off potential buyers.

“Economic uncertainty is the big thing that’s keeping buyers out of the market,” Berner said. “It comes down to how confident people are feeling in their finances that determines whether they want to buy a home.”

If the labor market continues to put up “some weak numbers,” he said then that could have a “larger impact than the market conditions moving positively.” However, Berner said he doesn’t necessarily project this will happen.

Regardless of larger concerns around the economy and job market, buyers are already showing a pick up in activity.

November’s pending home sales data showed a 3.3% increase from October, as well as a 2.6% year-over-year jump, according to the National Association of Realtors Pending Home Sales Report. NAR’s pending home sales index measures activity of signed housing contracts, which can be used as a gauge of buyer interest and movement in the housing market.

“Homebuyer momentum is building,” NAR’s chief economist, Lawrence Yun, said in a release. “The data shows the strongest performance of the year after accounting for seasonal factors, and the best performance in nearly three years, dating back to February 2023.”

More than 20% of Realtors said in a NAR survey released in December that they expect a year-over-year rise in buyer traffic in the next three months.

Yet while Realtor confidence is growing, confidence among homebuilders is still low despite a small uptick in December.

Some builders said they had to cut prices and use sales incentives, according to the most recent data from the NAHB/Wells Fargo Housing Market Index.

“Builders are looking at the market and seeing reduced demand,” Berner said. “They have a lot of inventory that’s kind of piling up on them, and so they’re not very eager to push the envelope in an environment where they have to deal with high cost of labor, with tariffs on materials.”

While he said he projects a modest improvement in 2026, he “wouldn’t be surprised” if building activity remained low.

JPMorgan analysts forecast a total of 1.3 million new homes will be needed in 2026, according to a note from earlier in December.

Original Article on Source

Source: “AOL Money”