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By Hugh Cameron
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After a year marked by elevated mortgage rates, multifaceted affordability issues and resultingly weak buyer demand, the opening weeks of 2026 have already offered several concerning signals regarding the health of the U.S. housing market.
Experts who spoke with Newsweek say they are cautiously optimistic that conditions could improve compared to 2025, but believe fragility will remain the watchword as broader economic issues continue to weigh on the sector.
Pending Home Sales Plunge
According to a report released Wednesday by the National Association of Realtors (NAR), the number of homes going under contract unexpectedly plummeted in December—the pending home sales index falling by 9.3 percent compared to a forecast drop of just 0.3 percent.
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Some analysts even anticipated a slight gain last month, but the drop to a five-month low marks the steepest slide since April 2020 at the outset of the Covid pandemic. Pending sales declined in all four regions—South, Midwest, Northeast and West—month-over-month, and were down 3 percent nationwide on an annual basis.
“The housing sector is not out of the woods yet,” wrote NAR’s chief economist Lawrence Yun. “After several months of encouraging signs in pending contracts and closed sales, the December new contract figures have dampened the short-term outlook.”
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Realtor.com senior economic research analyst Hannah Jones told Newsweek that November’s “unusually strong contract activity” may have exaggerated this monthly dip, but said upcoming readings will “help determine whether December was an outlier or an early signal of shifting buyer sentiment.”
In addition to pending home sales, Moody’s Analytics chief economist Mark Zandi told Newsweek that existing home sales also remain “off bottom, but barely, and consistent with sales at the height of the global financial crisis and pandemic.”
Sellers Outnumbering Buyers
A new analysis from the real estate brokerage Redfin has revealed that there were over 600,000 more sellers than buyers in the U.S. housing market in December, a 47 percent disparity, which marks an all-time high in records going back to 2013.
The gap increased 7.1 percent from November, and was largest in Austin, Texas, as well as in several Florida metros. While providing more leverage to buyers, as Redfin notes, this creates serious difficulty for those now competing to sell their properties to an increasingly shallow pool of prospective homeowners.
Redfin also revealed that the total number of buyers fell 5.9 percent in December to around 1.3 million—the steepest drop since early 2023 and reaching the lowest level since 2013.
And despite buyers having the upper hand, housing remains unaffordable for many, as NAR research shows median existing home prices rose again to $405,400 in December for their 30th consecutive month of year-over-year increases.
Housing Inventory Growth Slows
Many experts have diagnosed the issues with America’s housing market as largely inventory-linked. Despite weak buyer demand and a surplus of sellers, years of sluggish construction and homeowners “locking in” at lower rates have kept prices elevated and pushed supply at least as low demand across much of the U.S.
And recent data reveals that housing inventory growth has slowed dramatically from the summer. According to HousingWire, inventory growth sank to 10 percent on an annual basis in December, down from 33 percent in mid-2025.
“More supply means less price growth and better affordability,” wrote Logan Mohtashami, lead analyst at HousingWire, which also found that inventory declined in the opening days of 2026.
“The inventory recovery has slowed meaningfully,” Jones told Newsweek, pointing to data from Realtor.com showing a similar slowdown in growth to just 9.5 percent year over year—the weakest annual gain in nearly two years.
“Limited inventory continues to constrain buyer choice and transaction volume, even as demand remains uneven,” she said.
Jones also noted that new construction activity has weakened significantly, a reflection, she said, of “builder caution amid still elevated mortgage rates and slower sales.”
“Inventories of unsold homes are close to a record high, and builders are reducing their land purchases and applications for building permits are slumping,” said Zandi.
And beyond these three indicators, experts fear that broader economic conditions could weigh on housing market activity in 2026 and prevent further progress in terms of sales and affordability.
“If labor market softness persists, it could weigh on buyer confidence and household formation, dampening home sales even if financing conditions continue to improve,” said Jones.
“Assuming mortgage rates remain near six percent and the economy and jobs continue to grow, the weak housing market should slowly strengthen,” added Zandi. “Home sales will improve most, building activity remain depressed until inventories are right sized, and house prices and rents should continue to move more or less sideways.
“It will take more than a couple years for the housing market to fully recover.”
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