Housing Market Shows Signs of Recovery as Mortgage Rates Decline
Housing Market Shows Signs of Recovery as Mortgage Rates Decline
The U.S. housing market is showing encouraging signs of recovery as falling mortgage rates and gradually improving inventory combine to thaw what had been a frozen market.
The Numbers
January 2026 Data:
- Existing home sales: 4.2 million (annual rate), up 8% from January 2025
- Median home price: $392,000, up 3.2% year-over-year
- Inventory: 3.8 months supply, up from 2.9 months a year ago
- 30-year mortgage rate: 6.2%, down from 7.1% peak
What’s Driving the Change
Lower Rates The Federal Reserve’s shift toward easing has pushed mortgage rates down significantly:
| Period | 30-Year Rate |
|---|---|
| Peak (Oct 2024) | 7.8% |
| Jan 2025 | 7.1% |
| Jan 2026 | 6.2% |
| Forecast Dec 2026 | 5.5% |
Increased Inventory After years of historically low supply, inventory is finally improving:
- New construction reaching pre-pandemic levels
- More existing homeowners willing to sell
- Investor-owned properties entering market
Regional Variation
The recovery is uneven across markets:
Strongest Markets:
- Austin (+15% sales)
- Phoenix (+12% sales)
- Tampa (+11% sales)
Weakest Markets:
- San Francisco (-8% sales)
- Denver (-5% sales)
- Seattle (-3% sales)
Affordability Challenges
Despite improvements, significant challenges remain:
- Homes still 28% less affordable than 2019
- First-time buyers struggling with down payments
- Student debt limiting purchasing power
- Insurance costs rising dramatically
Advice for Buyers
Market experts recommend:
- Get pre-approved now - Lock in current rates
- Consider emerging markets - Better value in smaller cities
- Be patient but ready - Good homes still sell quickly
- Factor in all costs - Insurance, taxes, maintenance
Advice for Sellers
For those considering listing:
- Price realistically - Overpriced homes sit longer
- Invest in staging - First impressions matter more in buyer’s market
- Be flexible on timing - Accommodating buyers closes deals
Expert Outlook
“We’re cautiously optimistic about 2026,” said Lawrence Yun, NAR Chief Economist. “The frozen market is thawing, but we’re still far from normal. Full recovery will take time.”
For buyers who’ve been on the sidelines, conditions are gradually improving—but patience remains essential.