The U.S. housing market closed 2025 with a stronger-than-expected performance, as existing home sales picked up momentum in December while price growth continued to cool. The latest data suggests that although affordability challenges remain, market conditions have begun to stabilize after several years of turbulence driven by high mortgage rates, tight inventory, and elevated home prices.
According to National Association of Realtors, sales of previously owned homes rose in December to a seasonally adjusted annual rate of 4.35 million units. This represented a 5.1% increase from November, comfortably beating analysts’ expectations of a more modest gain. On a year-over-year basis, sales were up 1.4%, marking one of the strongest monthly performances in nearly three years after seasonal adjustments.
A Year of Resilience, Not Recovery
Despite the encouraging finish, 2025 as a whole remained challenging for homebuyers. Total existing home sales for the year reached 4.06 million units, essentially unchanged from 2024. This flat annual performance underscores how high prices and limited supply continued to constrain activity, even as demand showed signs of resilience.
December’s strength was broad-based on a monthly basis, with sales rising across all major U.S. regions. However, the annual picture was more mixed. Sales were higher than a year earlier in the Northeast and Midwest, while the South and West saw year-over-year declines, reflecting regional differences in affordability, inventory availability, and migration patterns.
Because existing home sales are recorded at closing, the December data largely reflects contracts signed in October and November. During that period, mortgage rates were relatively stable, with the average 30-year fixed-rate loan hovering between 6.2% and 6.3%. While still high by historical standards, these rates were notably lower than the nearly 7% levels seen earlier in 2025, helping unlock some pent-up demand.
Inventory Tightens Again
Inventory emerged as the most significant headline in the December report. At the end of the month, there were just 1.18 million homes available for sale nationwide. That figure was down a sharp 18% from November, though still 3.5% higher than the same period a year earlier.
With sales accelerating and new listings limited, housing supply fell to just 3.3 months at the current sales pace. This level is widely considered lean and continues to tilt the market in favor of sellers. Historically, a balanced market is associated with about six months of supply.
Low inventory has been one of the defining features of the U.S. housing market in recent years. Many homeowners remain reluctant to sell, either because they are locked into ultra-low mortgage rates secured before 2022 or because they are uncertain about buying another home in a high-rate environment.
Price Growth Slows, But Remains Positive
Tight supply helped keep prices in positive territory, though the pace of appreciation continued to slow. The median price of an existing home sold in December was $405,400, up just 0.4% from a year earlier. This marked the 30th consecutive month of annual price gains, but the increase was significantly smaller than the 1.2% annual gain recorded in November.
The deceleration in price growth is an important signal for the market. While prices remain historically high, slower appreciation could gradually improve affordability, particularly if wage growth continues and mortgage rates edge lower over time.
Signs of Improvement Heading Into 2026
Lawrence Yun, chief economist at National Association of Realtors, described 2025 as another difficult year for buyers but acknowledged that conditions began to improve toward the end of the year.
He noted that lower mortgage rates and softer price growth in the fourth quarter helped revive activity. Yun also suggested that more homes are likely to come onto the market as 2026 progresses, particularly in late winter and early spring, when listings typically increase.
“Similar to past years, more inventory is expected to come to market beginning in February,” Yun said, adding that many homeowners are taking a cautious approach, weighing when—or whether—to list their properties.
A Cautious but Improving Outlook
The December surge in existing home sales does not signal a full recovery, but it does point to a housing market that may be finding its footing. Demand remains sensitive to mortgage rate movements, and supply constraints continue to limit transaction volumes. Still, the combination of easing price growth, slightly improved financing conditions, and the potential for more listings in 2026 offers cautious optimism.
As the market enters the new year, buyers and sellers alike are watching mortgage rates and inventory trends closely. While affordability challenges are unlikely to disappear quickly, the strong finish to 2025 suggests that the U.S. housing market may be transitioning from stagnation toward gradual, uneven improvement.
