Home Sales Near 3-Year High

This week, the National Association of REALTORS® (NAR) reported that existing-home sales jumped 5.1% in December, marking the strongest pace in nearly three years. This is the kind of “buyers are waking up” headline the market has been waiting for, and it happened for one big reason: rates moved lower, and buyers responded.

The Highlight: Sales Are Up, But The Market Is Still Tight

Here are the key numbers behind the “nearly 3-year high” story:

Existing-home sales: up 5.1% month over month to a 4.35 million seasonally adjusted annual rate
Inventory: 1.18 million homes, equal to a 3.3-month supply (still tight)
Median price: $405,400, up just 0.4% year over year (price growth is slowing)
Average 30-year fixed in December: 6.19%, down from roughly 7% at the start of 2025

NAR also noted that inventory typically improves seasonally starting in February, which matters a lot if demand keeps building.

The Mortgage Rate Effect

NAR pointed out that the drop in rates has translated into meaningful monthly savings. Using a simple example:

$700,000 home, 10% down
Principal & Interest Payment at 7.00%: $4,191/mo
Principal & Interest Payment at 6.25%: $3,879/mo
Difference: $312/mo

And their research suggests a bigger move could unlock even more demand: a 1-point drop from 7% to 6% could add about 5.5 million additional households to the pool of potential buyers (including 1.6 million renters).

Demand Is Real: Household Formation Is Still Increasing

Even when sales slow, housing demand doesn’t disappear. It just waits for affordability to improve.

Two data points that matter here:

Total households are still rising. The Census Bureau’s Housing Vacancy Survey shows occupied housing units (a proxy for households) increased from 131.988 million in Q3 2024 to 133.079 million in Q3 2025, a gain of about 1.091 million households year over year.
NAR’s economists emphasize that household formation is happening across age groups, with especially large recent gains among older Americans (65–74 and 75+) as more people live independently longer.

Bottom line: more households forming + lower rates = demand re-entering the market fast, even if inventory is not ready for it yet.

Still, Buyers Face Real Challenges

This is not a “problem solved” market.

NAR noted inventory fell sharply month over month (seasonal, but still tight), and homeowners are taking their time deciding when to list.
In a Q4 2025 survey, about 70% of prospective buyers said they delayed plans due to uncertainty and costs, but many said lower rates and more affordable prices within 6 months would prompt them to move sooner.

So yes, buyers are back, but they are still price-sensitive, payment-sensitive, and inventory-constrained.

What This Means For Homebuyers Right Now

If you have been waiting for a “signal,” this is one. Lower rates are already pulling buyers off the sidelines.
The best hedge against competition is still execution: strong pre-approval, clean terms, and knowing your walk-away numbers.
If you are payment-sensitive, rate movement matters more than headlines. Even small drops can change your monthly budget meaningfully.

What This Means For Sellers

Buyer traffic tends to rise as rates fall, but inventory is still tight, so pricing and presentation matter.
If more sellers list in February as NAR expects, the market can shift neighborhood by neighborhood.
Move-in ready homes are positioned best if buyers re-accelerate.

What Agents Can Watch For Over The Next 30 to 60 Days

Mortgage rate trend (not one-day spikes)
Purchase mortgage applications (leading indicator)
New listings and months of supply locally (tight inventory can flip fast)
Price reductions (a signal of where affordability is still stressed)

Bottom Line

Lower rates are doing what lower rates usually do: they bring demand back quickly. December’s sales pace was the strongest in nearly three years, and the underlying demand story is supported by ongoing household formation growth.

The big question for 2026 is not “is demand there?” It is whether supply shows up fast enough to keep affordability moving in the right direction.

Disclosure: This post is for informational purposes only and is not financial advice, legal advice, tax advice, or a commitment to lend. Mortgage rates, payments, program guidelines, and approval outcomes vary based on credit, income, property type, occupancy, loan-to-value, and market conditions. Data cited reflects national sources and may not match local market conditions.