Falling Rates, Steady Inventory, and What Buyers Should Expect Heading Into 2026
As we approach the end of the year, the housing market is beginning to show subtle but important shifts—especially for buyers who have been waiting for affordability to improve. Mortgage rates have begun edging downward, the Federal Reserve has made another move in its rate-cutting cycle, and inventory continues to hold steady despite growing buyer activity.
While these national trends set the stage for what’s ahead, the real impact for buyers and sellers will unfold differently from market to market. Here’s a clear breakdown of what’s happening and what to watch as we move closer to 2026.
One of the most notable changes recently is a decline in median principal-and-interest (P&I) payments. As mortgage rates soften—even slightly—the difference in monthly obligations is becoming noticeable for new buyers entering the market.
For first-time or currently renting buyers, this shift is welcome news. Lower borrowing costs can make homes more attainable, especially after the rapid rate increases of the last few years.
However, there’s another side to the story:
Homeowners who locked in mortgage rates between 2–3% during the pandemic era are still largely staying put. Even with the recent rate reductions, today’s mortgage rates are far above what these homeowners currently pay. For many, moving would mean taking on a significantly higher monthly payment—a trade-off most are unwilling to make.
Bottom line:
New buyers benefit from improving affordability.
Existing low-rate homeowners are still unlikely to list their homes until rates fall much further.
These dynamics may keep listings tight from that group well into 2026.
At the Federal Reserve’s October meeting, policymakers approved another 0.25% cut to the federal funds rate, bringing the target range to 3.75%–4.00%.
Even though mortgage rates don’t move in direct lockstep with Fed decisions, the market often reacts quickly to the direction the Fed signals. In this case, mortgage rates eased again shortly after the announcement—positive momentum for buyers hoping refinancing will become a viable option sooner than expected.
What’s next?
A clearer outlook depends on the economic data that will be released once the government shutdown ends. Employment, inflation, and consumer spending figures will influence whether another rate cut is likely at the Fed’s December meeting.
In a year where many expected tight supply, inventory has surprisingly remained resilient. National housing supply has been rising at a faster pace than home sales, which is helping balance the market.
Inventory increased nearly 14% year-over-year
Existing home sales rose only about 6% during the same period
This widening gap is important because growth in listings can keep prices from accelerating too quickly, even during periods when buyers re-enter the market in higher numbers.
Winter typically brings a seasonal dip in inventory, so the next few months will reveal whether supply remains steady or begins tightening again.
Market expectations currently point to a strong possibility of another Fed rate cut in the coming months. According to futures-based projections, there’s roughly a 65% chance of an additional 25-basis-point reduction at the December meeting.
However, these predictions are highly sensitive to economic data. Once withheld government reports begin rolling out after the shutdown, any surprising inflation or labor numbers could shift expectations quickly.
That means anyone watching rates, especially buyers waiting for a more favorable moment, should pay close attention to incoming economic reports.
While these national indicators provide valuable context, real estate is always hyperlocal. Inventory could be rising nationally but shrinking in your city. Rates may be easing, but home prices in your county may be moving faster than the national average.
This is why understanding your local market conditions—pricing, supply, neighborhood trends, and buyer demand—is essential before making any real estate decision.
If you're considering buying or selling in the coming months, partner with a knowledgeable local agent who can help interpret these national trends as they apply to your community.
The housing market is showing early signs of increased affordability thanks to easing mortgage rates and strong inventory levels. But the path ahead depends largely on economic data and future Fed decisions. For buyers, especially first-timers, the current market may offer openings that weren’t available just a year ago. For sellers, growing buyer activity could lead to a more dynamic spring market in 2026.
As always, staying informed, and focusing on local trends, is the key to navigating what’s ahead in real estate.
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