Hopeful home buyers may be getting their New Year’s wish: Lower mortgage rates—and they’re fueling an uptick in home sales.
Existing-home sales jumped 5.1% in December, the strongest reading in nearly three years, even after adjusting for seasonal factors, the National Association of REALTORS® reported Wednesday. Sales are up 1.4% from a year ago. December’s gain followed a smaller increase in November, also tied to the drop in mortgage rates that was set in motion this past fall.
It’s the type of building momentum the housing market has been waiting for. After all, “2025 was another tough year for home buyers, marked by record-high home prices and historically low home sales,” says Lawrence Yun, NAR’s chief economist. “However, in the fourth quarter, conditions began improving, with lower mortgage rates and slower home price growth.”
Read more: 2026 Real Estate Outlook: What Leading Housing Economists Are Watching
The Mortgage Rate Effect
Housing affordability began improving this fall, despite higher home prices, due to stronger income growth—up 3.8% in October from a year earlier—and declining mortgage rates compared to a year ago, NAR’s Affordability Index shows, as reported on the association’s Economists’ Outlook blog.
The 30-year fixed-rate mortgage averaged 6.19% in December, down from roughly 7% at the start of 2025. That decline has translated into hundreds of dollars in monthly savings for potential buyers and has coincided with mortgage applications for home purchases—a gauge of future home buying—remaining up by double-digit percentages year over year.
Consider a $500,000 home with a 30-year mortgage at 7% and a 10% down payment: A borrower would pay $3,895 per month. At 6.25%—where rates have hovered lately—that payment drops to $3,672, a $223 monthly difference, according to LendingTree.
NAR forecasts mortgage rates will average 6% in 2026. A one percentage point drop—from 7% to 6%—could bring an additional 5.5 million households, including 1.6 million renters, into the pool of potential buyers this year, NAR research shows.
Read more: A Mortgage Rate Drop to 6% Would Ring in More Home Buying
Still, Buyers Face Challenges
But lower rates alone aren’t enough to make the market easy for buyers.
Housing inventories fell 18% in December compared to November, following several months of improvement, NAR’s data shows. While inventories do typically decline during colder months, they remain up 3.5% from December 2024. Buyers are finding more choices than a year ago, but supply constraints remain in many markets.
Buyers need to go in expecting: “Inventory levels remain tight,” Yun says. “With fewer sellers feeling eager to move, homeowners are taking their time deciding when to list or delist their homes. Similar to past years, more inventory is expected to come to market beginning in February.”
Until then, home prices continue to run high—good news for sellers, but a stretch for many buyers. That said, December’s sales data show the pace of home price increases is notably slowing: The median sales price of an existing-home was $405,400 in December, up just 0.4%, from a year earlier, NAR reports.
Economic uncertainty and rising costs have led about 70% of 1,000 prospective buyers surveyed in the fourth quarter of 2025 to say they delayed their home purchase plans. However, respondents said more affordable home prices and lower mortgage rates within the next six months would prompt them to move more quickly, according to RE/MAX’s consumer survey.
Regional Snapshot
Here’s a closer look at how existing-home sales fared across the country in December, according to NAR’s latest housing report:
- Northeast: Sales rose 2% in December compared to November, settling in at an annual rate of 520,000. Sales are still down 1.9% from a year ago. Median price: $496,700, up 3.7% from December 2024.
- Midwest: Sales were up 2% in December from the previous month, reaching an annual rate of 1 million, holding at a steady pace compared to last year. Median price: $306,000, up 3.1% from a year ago.
- South: Existing-home sales posted a 6.9% increase in December from November to an annual rate of 2.02 million. Sales are up 3.6% from last year. Median price: $360,200, down 0.3% from December 2024.
- West: Sales rose 6.6% in December from November to an annual rate of 810,000. Sales were unchanged from a year ago. Median price: $605,600, down 1.4% from December 2024.
