Home Sales Plummet Despite Record Low Rates—Is Your Dream Home Slipping Away? Discover Why!

January 2026 kicked off with a notable downturn in existing home sales, which plummeted by 4.4% compared to the same month last year, according to data from the National Association of Realtors (NAR). This trend raises concerns among potential homebuyers, as sales also fell 8.4% from December 2025, marking a significant drop amidst fluctuating mortgage rates.

The seasonally adjusted annual rate of existing home sales now sits at 3.91 million, well below the 30-year lows recorded previously. The data also shows median home prices continuing their upward trend, with a median price of $396,800 in January—an increase of 0.9% year-over-year, marking the 31st consecutive month of year-over-year price increases. This persistent rise in prices, despite a drop in sales, paints a complex picture for the housing market.

NAR Chief Economist Lawrence Yun expressed disappointment over the downturn, noting that the decline in sales was widespread across the country. This indicates that factors beyond seasonal winter weather contributed to the drop. For instance, the West saw the most significant year-over-year decline at 7.9%, a region less affected by harsh winter conditions, suggesting that affordability and consumer sentiment may also be at play.

Despite the bleak start to the year, there are signs that the housing market may rebound as spring approaches. The Housing Affordability Index from NAR improved to 116.5 in January, up from 102 the previous year, reaching its highest point since March 2022. This improvement is attributed to a drop in mortgage rates and wage growth outpacing home price increases, making it more feasible for buyers to consider entering the market.

Current mortgage rates for a 30-year fixed-rate mortgage averaged 6.09% this week, according to Freddie Mac. This stability in rates offers some respite for buyers and sellers, even as they remain near the lowest levels seen in the past 17 months. However, experts like Jiayi Xu, an economist at Realtor.com, assert that a further drop in rates is necessary to “truly reignite the housing market.”

While inventory levels remain tight at 1.22 million unsold homes—up only 3.4% year-over-year—there was a slight increase in the months' supply of homes available, rising to 3.7 months in January from 3.5 months in December. Economists like Lisa Sturtevant of Bright MLS anticipate an uptick in home shoppers as improved affordability, rising inventory, and slower price growth converge.

Yet, the current trends in mortgage applications reflect ongoing hesitance among potential buyers. The Mortgage Bankers Association reported a 0.3% decline in mortgage application activity this week, with a 2% drop in the seasonally adjusted purchase index. Borrowers are demonstrating a preference for financing options such as FHA loans and adjustable-rate mortgages, indicating that affordability concerns persist.

The market appears to be in a state of freeze, with pending sales data from Redfin highlighting a 5.1% decrease year-over-year in the four-week average ending February 8, 2026. Homes are now sitting on the market for an average of 66 days, which is one week longer than the same time last year and represents the longest duration since 2019.

As we move through winter and into spring, all eyes will be on the housing market. With potential buyers preparing for the spring buying season, the question remains: will the combination of improved affordability and stable mortgage rates be enough to spark renewed interest in the housing market? The next few months will be crucial in answering this question and determining the direction of home sales in 2026.