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US Housing Market Downturn Continues Into 2026

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  Published in House and Home on Wednesday, January 14th 2026 at 19:37 GMT by WSB Radio

Thursday, January 15th, 2026 - The dramatic downturn in the US housing market that began in 2025 shows no immediate signs of a rebound, setting the stage for a protracted period of adjustment that's expected to extend well into 2026 and potentially beyond. A recent report from the National Association of Realtors (NAR), coupled with ongoing economic analysis, paints a sobering picture for both prospective buyers and sellers.

The year 2025 witnessed the lowest annual sales volume in US homes since 1994 - a stark indicator of the market's significant contraction. Sales plummeted by a substantial 17.5% compared to 2024, a drop that reverberates across the entire housing ecosystem. As Lawrence Yun, NAR's chief economist, succinctly put it, the "combination of higher rates and limited inventory is really squeezing buyers out of the market."

Interest Rates: The Persistent Headwind

The primary culprit behind this slowdown is the stubbornly high mortgage interest rate environment. Throughout 2025, and with forecasts consistently predicting their persistence, these elevated rates have significantly impacted affordability. While the median existing-home price registered at $382,600 in December 2025 - a 3.6% increase year-over-year - the sheer difficulty in securing a mortgage is overshadowing any nominal price appreciation. Potential buyers, many first-time homebuyers who were active participants just a few years ago, are now finding themselves priced out of the market.

Inventory: A Supply-Side Crisis

Adding fuel to the fire is the continued lack of housing inventory. This isn't a new problem; it's been a recurring issue for years, exacerbated by factors including supply chain disruptions in 2023 and 2024, labor shortages in the construction industry, and a general reluctance of existing homeowners to sell, particularly given the higher rates they'd face if they were to buy a new home. While new construction is underway, the pace of building simply isn't sufficient to meet the ongoing, albeit dampened, demand.

Price Dynamics and the Shifting Landscape

The elevated home prices, while still a factor, are increasingly viewed as a symptom rather than the root cause of the market's woes. The upward pressure on prices during the pandemic-era boom has demonstrably eased. While prices haven't necessarily begun to fall significantly across the board - due in part to the ongoing inventory shortage - the rate of appreciation has slowed dramatically. The real indicator of the market's health isn't the price per square foot, but the volume of homes changing hands.

Looking Ahead to 2026: A Period of Adjustment

Analysts are cautiously pessimistic about a swift turnaround. The consensus expectation is that mortgage rates will remain elevated throughout 2026, continuing to constrain buyer activity. This suggests a prolonged period of market adjustment. The "adjustment" period Yun refers to will likely involve a gradual cooling of the market - a slow burn rather than a sudden crash. Price corrections are possible in some areas, but a widespread, dramatic decline seems unlikely given the limited inventory.

Advice for Buyers and Sellers

For potential homebuyers, the prevailing advice is patience and financial preparedness. The time to jump into the market may not be now. Waiting for rates to potentially moderate and for inventory to slowly improve could be beneficial. However, prospective buyers should also be realistic; waiting for a significant price drop is unlikely.

Sellers, too, need to recalibrate their expectations. The days of quick sales and bidding wars are largely behind us. Pricing homes competitively - often below asking price - and being prepared for longer listing timelines are now the norm. The market is favoring buyers, and sellers need to adapt to this new reality. Considerations around staging, curb appeal, and offering concessions are more crucial than ever to attract buyers in this environment.

Ultimately, the US housing market is entering a new phase - one characterized by cautious optimism, tempered expectations, and a recognition that the easy gains of the recent past are unlikely to return anytime soon.