Housing Market Weakness Extends Into 2026
Sales of previously owned U.S. homes fell sharply in January 2026, declining 8.4 percent from December 2025 to a seasonally adjusted annual rate of 3.91 million units, the National Association of Realtors reported this week. The drop marked the steepest monthly decline in nearly four years and pushed sales to their lowest level since late 2023.
The January figure was 4.4 percent below the year-earlier pace, with weakness spread across all four major regions. The pullback came even as borrowing costs continued to moderate and wage growth supported stronger affordability readings.
The NAR’s Housing Affordability Index rose to 116.5 in January, the highest level since March 2022, up from 111.6 in December and 102 a year earlier. Index readings above 100 indicate that a household earning the median income can afford a mortgage on a median-priced home.
Dr. Lawrence Yun
“The decrease in sales is disappointing. The below-normal temperatures and above-normal precipitation this January make it harder than usual to assess the underlying driver of the decrease and determine if this month’s numbers are an aberration,” said NAR Chief Economist Dr. Lawrence Yun. “Affordability conditions are improving, with NAR’s Housing Affordability Index showing that housing is the most affordable it’s been since March 2022. This is due to wage gains outpacing home price growth and mortgage rates being lower than a year ago. However, supply has not kept pace and remains quite low.”
“Due to low supply, the median home price reached a new high for the month of January,” Yun added. “Homeowners are in a financially comfortable position as a result. Since January 2020, a typical homeowner would have accumulated $130,500 in housing wealth.”
Persistent inventory shortages continued to underpin home prices. The national median existing-home price increased 0.9 percent from a year earlier to $396,800, setting a new record high for the month of January and extending the streak of annual price gains to 31 consecutive months. Yun estimated that the typical homeowner has accumulated roughly $130,500 in housing equity since early 2020.
Housing inventory dipped 0.8 percent from December to 1.22 million units, representing a 3.7-month supply at the current sales pace. While supply was 3.4 percent higher than a year earlier, it remained well below the roughly six-month level generally viewed as balanced.
Regional sales declined on both a monthly and annual basis, with price trends showing divergence:
- Northeast: Sales fell 5.9 percent month over month and 4.0 percent year over year; median price rose 5.8 percent to $505,400.
- Midwest: Transactions dropped 7.1 percent from December and 7.1 percent from a year earlier; median price increased 2.3 percent to $295,400.
- South: Sales declined 9.0 percent monthly and 1.6 percent annually; median price edged up 0.1 percent to $351,200.
- West: Activity slid 10.3 percent from the prior month and 7.9 percent from January 2025; median price fell 1.4 percent to $600,400 — the only region to post an annual price decline.
Single-family home sales, which represent the majority of the market, decreased 9.0 percent to an annualized pace of 3.53 million units, while condominium and co-op sales eased 2.6 percent to 380,000 units. Median prices rose 0.6 percent for single-family homes to $400,300 and 3.8 percent for condos and co-ops to $364,600.
Properties took longer to sell, with the median days on market rising to 46 from 39 in December and 41 a year earlier. First-time buyers accounted for 31 percent of transactions, up from 29 percent the prior month and 28 percent a year ago, signaling modest gains in market accessibility. Cash purchases slipped to 27 percent of sales, investor and second-home buyers fell to 16 percent, and distressed sales (foreclosures and short sales) held steady at 2 percent.
The average 30-year fixed mortgage rate averaged 6.10 percent in January, down from 6.19 percent in December and 6.96 percent a year earlier, according to Freddie Mac data cited in the report.
Although lower mortgage rates and improving affordability metrics offer some support, the ongoing shortage of homes for sale continues to limit overall transaction volume. Analysts say the pace at which new listings enter the market during the spring selling season will be critical in determining whether sales stabilize or remain subdued through the first half of 2026.
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