Landed home transactions accelerated into year-end 2025, as existing home sales in December rose 5.1% on a seasonally adjusted basis to a nearly three-year high, reinforcing a broader recovery signal also reflected in new home sales that exceeded expectations in September and October and in mortgage purchase applications that edged higher in early January 2026.
Existing home sales jumped 5.1% in December to a near three-year high, signaling recovery alongside firmer new-home sales and mortgage demand.
The late-2025 improvement pushed activity toward a four-year peak in broader transaction measures, although durability is expected to be tested by pending home sales data, which is closely watched for confirmation of sustained momentum.
The National Association of Realtors’ chief economist, Lawrence Yun, projects that nationwide home sales could increase 14% in 2026, a view supported by steady job growth, improving interest-rate conditions, and rising mortgage applications.
Affordability, however, remained constrained, with the housing affordability index in November 2025 standing 35% below its pre-COVID level, indicating that demand expansion may skew toward higher-income cohorts. Mortgage rates fell roughly 75 basis points from late May to mid-September 2025, and rates could trend toward 6% in 2026, a shift that would qualify additional buyers without necessarily restoring entry-level participation, which has been reported at a record low. Realtor.com forecasts mortgage rates to average around 6.3% in 2026, enough to draw more buyers off the sidelines while keeping affordability constraints in place.
Pricing implications for 2026 appear mixed, with forecasts calling for a national stall near 0% while also projecting an average home value increase of about 4%, reflecting moderation rather than a reversal as accumulated equity remains substantial. Regional dispersion is expected, including potential declines along portions of the West Coast and the Sun Belt, where a new-home glut could pressure resale pricing, while steadier appreciation may persist in undersupplied markets.
Top-market projections underscore this divergence: Hartford-West Hartford-East Hartford, Conn. is forecast for 7.6% sales growth and 9.5% price growth, Rochester, N.Y. for 5.3% sales growth and 10.3% price growth, and Worcester, Mass.-Conn. for 12.6% sales growth but 2.4% price growth.
Inventory dynamics are central, with supply rising as new construction picks up, yet the housing shortage is still estimated at 1.2 million homes. Inventory is roughly 20% higher than the previous year, increasing buyer choice even as supply remains below what demand ultimately requires.
The lock-in effect has been fading as life events prompt listings, smaller payment gaps in top markets support mobility, and inventory growth in places such as Milwaukee (16.6%) and Grand Rapids (15.9%) has coincided with the return of price reductions, shifting negotiations while demand is increasingly influenced by baby boomers and equity-rich owners. Homeowners with SORA-linked loans are expected to benefit from faster rate adjustments within 30-60 days following any further Federal Reserve policy changes, potentially increasing refinancing activity as floating-rate products respond more quickly than fixed-rate alternatives.
