US Housing Market Shows Strongest Performance in Nearly Three Years

WASHINGTON, D.C. – December 29, 2025 – The American housing market showed its most significant signs of life in years this November, as a key indicator of future sales posted its strongest performance since early 2023. Pending home sales—a measure of signed contracts on existing homes—jumped 3.3% from the prior month and 2.6% compared to the same time last year, according to a report released by the National Association of REALTORS® (NAR).

The surge, which defied many analysts' more modest expectations, suggests that a combination of improving affordability and greater housing supply is coaxing buyers back into the market after a prolonged period of hesitation. The positive movement was recorded across all four major U.S. regions, signaling a broad-based, if tentative, recovery.

“Homebuyer momentum is building,” said NAR Chief Economist Lawrence Yun in the report. “The data shows the strongest performance of the year after accounting for seasonal factors, and the best performance in nearly three years, dating back to February 2023.”

A Market Awakening from Its Slumber

The November data represents a significant acceleration in market activity. The Pending Home Sales Index (PHSI), a forward-looking indicator where an index of 100 equals the level of contract activity in 2001, rose to 79.2. This marks a notable climb from an upwardly revised 76.7 in October and the low 70s seen for much of 2025. The last time the index approached this level was in February 2023, when it stood at 81.3, before rising interest rates dampened buyer enthusiasm.

This recent uptick provides a potential turning point for a market that has been largely defined by a stalemate between would-be sellers reluctant to give up low-rate mortgages and buyers sidelined by high borrowing costs and record prices. The consecutive months of growth in contract signings suggest that this dynamic may finally be starting to shift, breathing new life into housing activity as the year closes.

The Shifting Equation of Affordability

The primary driver behind this resurgence appears to be a tangible improvement in housing affordability. After peaking near 7% in May 2025, the average rate on a 30-year fixed mortgage fell to around 6.18% in November, according to Freddie Mac. This decline followed the Federal Reserve's resumption of interest rate cuts in September, providing much-needed relief to homebuyers' monthly budgets.

This easing of borrowing costs has been coupled with two other critical factors cited by Yun: wage growth that is finally beginning to outpace home price appreciation and an increase in available inventory. For months, buyers have been frustrated by a scarcity of listings. The November report indicates that more sellers are entering the market, giving buyers more options and slightly reducing the intense competition that defined the post-pandemic landscape.

“Improving housing affordability–driven by lower mortgage rates and wage growth rising faster than home prices–is helping buyers test the market,” Yun noted. “More inventory choices compared to last year are also attracting more buyers to the market.”

This changing environment is reshaping the homebuying journey. Rather than facing fierce bidding wars for a handful of properties, buyers are finding a more balanced and manageable process. One independent economist noted that the data implies buyers are finding the “payment-to-paycheck equation more manageable in areas where prices are cooling the most,” allowing for more rational decision-making.

West Leads a Nationwide Rebound

While the recovery was national in scope, the West region was the undisputed leader in November's rebound. Pending sales in the West skyrocketed by 9.2% month-over-month, a dramatic increase that significantly boosted the national average. Year-over-year, sales in the region were up 2.4%.

Other regions also posted solid gains. The South, the nation's largest housing market, saw a 2.4% monthly increase and the strongest annual gain at 3.3%. The Northeast experienced a 1.8% rise in both its monthly and yearly figures, while the Midwest saw contract signings increase by 1.3% for the month and 2.2% for the year.

The strong performance in the West, a region that previously saw some of the steepest price corrections, suggests that improved affordability is having an outsized impact in formerly overheated markets, making them attractive to buyers who had been priced out.

A Cautiously Optimistic Outlook

Despite the strong November report, experts are offering a measured outlook for the months ahead. Some analysts caution that underlying economic uncertainty could still temper the market's momentum. One chief economist at a major real estate data firm suggested that while the uptick is positive, “increasing economic uncertainty will continue to hold some buyers and sellers back” heading into 2026, predicting that total home sales for 2025 may end up largely flat compared to the prior year.

Another expert believes that the market in 2026 will be shaped less by fluctuating interest rates and more by fundamental life changes. “While affordability is still stretched and inventory tight in many regions, the recent pullback in rates and cooling price growth have helped stabilize the landscape,” one deputy chief economist stated, suggesting these factors are “setting the stage for a more constructive year ahead.”

This perspective implies that while financial conditions are improving, the true driver of sales will be the return of normal housing turnover driven by life events like marriages, births, and job relocations.

Potential headwinds also remain on the horizon. The Federal Reserve has signaled a likely pause in its rate-cutting cycle, meaning the rapid decline in mortgage rates may level off. Furthermore, a notable disconnect has emerged between the positive sales data and the performance of housing-related stocks, which have recently underperformed the broader market. This divergence suggests that while homebuyers are celebrating newfound affordability, some market analysts are watching for signs of whether this momentum can be sustained against broader economic currents.