Housing Market Ends 2025 on Stronger Note
The U.S. housing market is showing late-year improvement as mortgage rates decline from earlier highs. The average 30-year fixed mortgage rate closed out 2025 at 6.15%, its lowest level since October 2024, according to Freddie Mac data.
Throughout 2025, the average 30-year fixed rate moved between 6.17% and 7.04%, a range of 87 basis points. The decline from peak rates has helped boost buyer activity heading into the new year.
December Sales Beat Expectations
The pullback in mortgage rates helped drive existing U.S. home sales in December to a seasonally adjusted annual rate of 4.35 million units, a 5.1% increase from November and the fastest sales pace in nearly three years, according to the National Association of Realtors (NAR).
"December home sales after adjusting for seasonal factors were the strongest in nearly three years," NAR reported. All four regions tracked showed increases in sales of existing homes in December compared to the previous month.
Full Year Still at 30-Year Low
Despite the late-year improvement, the U.S. housing market slump dragged into its fourth year in 2025 as sales remained stuck at a 30-year low. Sales of previously occupied U.S. homes totaled 4.06 million last year, essentially flat versus 2024 when sales sank to the lowest level since 1995.
The housing market continues to struggle with affordability challenges as prices remain elevated even as sales volume languishes.
Price Pressures Persist
Home prices rose in December, pushing the median sales price to $405,400, a 0.4% increase from December 2024. That represents an all-time high for any previous December and the 30th consecutive month with an annual increase in the median sales price.
The median national home price for 2025 rose 1.7% to $414,400, according to NAR. The combination of elevated prices and mortgage rates above 6% continues to challenge affordability for many buyers.
Inventory Remains Tight
Total homes for sale at the end of December were 1.18 million units, down 18.1% from November and up just 3.5% from December 2024. December's month-end inventory translates to a 3.3-month supply at the current sales pace—well below the 5- to 6-month supply traditionally considered a balanced market.
The inventory shortage continues to support prices even as demand remains constrained by affordability pressures.
2026 Outlook
NAR's Lawrence Yun is forecasting that existing U.S. home sales will jump 14% in 2026. That's more optimistic than several other housing economist forecasts, which range from a 1.7% to 9% increase.
According to Realtor.com's 2026 Housing Forecast, mortgage rates are expected to average 6.3% in 2026, offering slightly more relief than 2025. If rates continue declining, pent-up demand could drive meaningful sales improvement.
Why This Matters for Investors
The housing market dynamics present both risks and opportunities across multiple sectors:
Real Estate Investment Trusts (REITs) may benefit from declining rates and potential sales improvement, particularly residential-focused REITs.
Homebuilding stocks could see renewed interest if the 2026 sales rebound materializes. The sector has positioned for gradual recovery.
Financial sector mortgage originators may benefit from improving refinance activity as rates decline from 2025 highs.
Investors should monitor Federal Reserve policy and mortgage rate trends for signals about housing market direction heading into 2026.
Sources: Freddie Mac, NAR, PBS News, CNBC