On February 12, 2026, key data released on the U.S. housing market revealed a significant downturn in sales of previously owned homes, highlighting ongoing challenges in a sector that plays a central role in the broader American economy. While mortgage rates have recently moderated slightly, affordability hurdles and supply constraints continued to slow activity, prompting concern among real estate professionals and economic observers alike.
According to the latest report from the National Association of Realtors (NAR), existing home sales in January 2026 fell by 8.4 % compared with December 2025, marking the steepest monthly decline in nearly four years and bringing the seasonally adjusted annual sales pace to 3.91 million units. This figure also sits below expectations from economists, who had forecast stronger performance.
What the Numbers Reveal
The slump was broad‑based, affecting all major regions of the country, though the West saw the most pronounced decline. First‑time buyers accounted for just 31 % of sales, well under the historical average of approximately 40 %, underscoring persistent affordability issues that continue to deter many prospective homeowners.
Despite the drop in transactions, home prices continued to rise, with the national median existing home price climbing 0.9 % year‑over‑year to $396,800. This marked the 31st consecutive month of annual price increases, even against the backdrop of softer sales volumes.
Mortgage Rates and Market Conditions
Part of the narrative around housing affordability centers on financing costs. On the same day that sales figures were released, data from Freddie Mac showed that the 30‑year fixed mortgage rate dipped slightly to 6.09 %, down from 6.11 % the prior week and returning to levels seen roughly three weeks earlier. The 15‑year fixed rate also eased to 5.44 %.
While these modest decreases offer some relief compared with the higher rates of the recent past, mortgage rates hovering above 6 % still weigh on affordability, especially for first‑time buyers and those seeking to upgrade homes. The broader trend of rates tracking Treasury yields suggests that unless there’s a significant shift in financial markets or policy settings, borrowing costs may remain elevated relative to pre‑pandemic norms.
Disparity Between Affordability and Demand
Interestingly, several market indicators point to improving affordability compared with recent years, yet buyer demand has not responded as expected. Analysts note this disconnect reflects deeper structural issues: limited inventory, rising prices, and economic uncertainty all continue to temper buyer enthusiasm. One housing market observer described the situation as one where “favorable buying conditions are not translating into increased demand.”
Although affordability, as measured by the ratio of mortgage payments to typical household income, has improved from peaks seen earlier in the decade, many buyers remain cautious in light of economic headwinds. Persistent high prices, paired with regional cost disparities and inventory shortages, create a complex landscape for both buyers and sellers.
Signs of Market Rebalancing
Despite the current downturn, economists and real estate professionals watching longer‑term trends anticipate gradual market adjustment. Data from Realtor.com and housing economists suggest that inventory levels may continue to rise, helping to ease upward price pressure and eventually support more transactions in the coming months. Falling mortgage rates, if sustained or further reduced, could also bolster demand during the traditionally active spring buying season.
However, experts caution that structural issues, such as a chronic housing shortage in many markets and decade‑long underbuilding, will not resolve quickly. A combination of demographic shifts, such as millennial homebuying preferences, and localized market dynamics means recovery is likely to be uneven across regions.
What This Means for Buyers and Sellers
For homebuyers, the current environment presents a mix of opportunities and challenges. While easing rates and rising inventory can offer more choices, high prices and competitive markets in certain areas still pose affordability challenges. Prospective buyers are more discerning, often prioritizing properties that meet specific needs in terms of location, condition, and value.
For sellers, the slowdown in transactions suggests that pricing strategies and market timing will be increasingly important. In many regions, homes are staying on the market longer, and sellers may need to be flexible on price or incentives to attract buyers.
Looking Ahead
As the housing market enters 2026, the broader narrative is one of gradual adjustment rather than dramatic fluctuation. A combination of moderate mortgage rate reductions, incremental inventory improvements, and demographic demand could lead to more balanced conditions later in the year. Yet for now, the sharp January sales decline underscores the fragility of the current housing recovery and the need for continued attention to affordability and supply issues.
