Fed holds rates steady as buyer's market strengthens

As many expected, the Fed held the federal funds rate at 3.5% – 3.75%. The decision to leave interest rates unchanged ends the streak of three consecutive meetings with a quarter-point cut. The committee was mostly in agreement with the decision, but two members dissented and wanted an additional rate cut.

In December, there were 631,535 more sellers than buyers, the largest gap since Redfin began tracking in 2013 and firmly placing the housing market in a buyer's market. This gap widened by over 7 percentage points from November, the largest single month increase since 2022 and is up 22.2 percentage points year-over-year.

The S&P Cotality Case-Shiller U.S. National Home Price NSA Index rose 1.4% annually in November, unchanged from the previous month. The increase in home prices is below the annual rate of inflation, meaning home prices declined year-over-year.

In 2025, the American housing market operated like a "tale of two countries." The national median home price eked out a modest 1.7% increase, according to the National Association of REALTORS^®, but this figure masked a violent geographic divide.

In the South and West, the pandemic-era boomtown fever finally broke. Markets like Austin and Tampa saw year-over-year value drops of 6.1% as high inventory and insurance spikes forced sellers to capitulate. Florida, in particular, faced a perfect storm of rising HOA fees and condo safety assessments, sending prices in Cape Coral tumbling by double digits. In fact, 24 of the 50 largest metros saw annual price declines, a stark contrast to the universal growth of years prior.

Conversely, the Northeast and Midwest remained remarkably resilient. Cities like Chicago and Buffalo saw prices climb as limited supply met steady demand from buyers who were priced out of more expensive coastal hubs. This regional tug-of-war left the national market in a state of "stagnant stability" – prices weren't crashing everywhere, but the era of easy, universal appreciation was officially over, replaced by a lock-in effect that kept many sellers paralyzed.

As we move into 2026, the narrative is shifting from correction to recalibration. Economists expect the inventory of existing homes to finally thaw as homeowners who locked in 3% mortgage rates years ago begin to accept the new normal of 6% rates. This influx of supply is projected to keep national price growth muted; Zillow forecasts a rise of just 1.2% through the end of the year. In the Sun Belt, price floors are expected to stabilize as the 2025 corrections make these regions attractive to investors once again. However, the most significant trend for 2026 will be the affordability migration. Buyers are increasingly targeting midsize markets in the Rust Belt and Appalachia, where the cost of living remains low, and remote work remains a viable option.

For the first time since 2022, there is a glimmer of hope for buyers: Affordability is expected to improve as the U.S. housing market enters a long, gradual reset where rising incomes finally outpace home-price growth. This would improve affordability and lift home sales over time without a sharp price crash or recession. While the Federal Reserve’s interest rate path remains the primary wild card, 2026 is shaping up to be a more buyer-friendly year compared to the volatility of the early 2020s.

February 10: California Mortgage Expo, Palm Springs

February 17: Texas Mortgage Roundup, Austin

February 24: California Mortgage Expo, Sacramento

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