Overview: The Housing Market in December 2025
2025 was another difficult year for home buyers, with prices at record highs and sales at historic lows. Nonetheless, conditions began to improve in the fourth quarter, with lower mortgage rates and slower price appreciation.
In December, existing-home sales were at their highest level in nearly three years, with month-over-month gains being recorded in all four U.S. regions. However, inventory remained low as new listings failed to keep pace with rising activity. Consequently, consumers faced fewer market options, and contract-signing activity declined.
From a broader perspective, key indicators also point to improvements in the overall economy. Economic output increased notably in the second and third quarters, driven by growth in consumer and government spending, exports, and investment.
In addition, while remaining above the Federal Reserve's target of 2%, the latest data show moderating consumer price inflation. Normally, the Federal Reserve delays cutting rates until inflation is stabilized, but due to weakening in the labor market, it has cut rates three times since September.
Overall, the labor market is stalling, but job growth is essentially at record highs compared to the pre-pandemic period. If inflation continues to improve, we can expect additional rate cuts throughout 2026 and, consequently, a decline in the 10-year Treasury rate and the mortgage rate.
