December’s Unexpected Boost in Existing Home Sales
Picture this: as the holiday lights were twinkling and most people were wrapping gifts, the housing market decided to deliver its own surprise package. Sales of previously owned homes climbed to a seasonally adjusted annual rate of 4.35 million units in December—a solid 5.1% leap from November. That beat analyst forecasts calling for a more modest 2% uptick, and it marked the strongest monthly performance in almost three years once seasonal adjustments are factored in.
What makes this particularly interesting is the context. The full year wrapped with roughly 4.06 million existing home sales, basically flat compared to 2024. That means 2025 went down as one of the weakest periods for home transactions in decades. Yet December’s momentum suggests buyers might have been waiting for better conditions—and finally found them.
In my view, this isn’t random luck. Lower borrowing costs toward the end of the year likely encouraged fence-sitters to jump in before rates potentially ticked back up. It’s a reminder that even in tough markets, pockets of opportunity can emerge when conditions align just right.
Breaking Down the Key Numbers
Let’s get into the specifics because the details tell a nuanced story. The median sales price for an existing home landed at $405,400 last month. That’s up a tiny 0.4% from a year earlier—the smallest annual gain in recent memory and a clear slowdown from the 1.2% rise seen in November. After years of relentless price climbs, this moderation feels almost refreshing.
Inventory, meanwhile, dropped sharply from November, landing at 1.18 million homes available for sale by year’s end. That’s an 18% plunge month-over-month, though still 3.5% higher than December 2024. At the current sales pace, supply equates to just 3.3 months—a level that’s still tight by historical standards and continues to prop up prices despite the slowdown in growth.
- Sales pace: 4.35 million annualized (up 5.1% from November, 1.4% from last year)
- Median price: $405,400 (up 0.4% year-over-year)
- Inventory: 1.18 million units (down 18% from November)
- Months’ supply: 3.3 months (lean territory)
- Full-year sales: 4.06 million (unchanged from 2024)
These figures show a market that’s not booming but definitely not collapsing either. The lean supply remains the dominant force keeping prices from falling outright.
Regional Variations Tell Their Own Story
Not every corner of the country felt the same lift. Sales rose month-over-month across all four major regions—Northeast, Midwest, South, and West—which is encouragingly broad-based. On an annual basis, though, the picture gets patchier: gains in the Northeast and Midwest, but declines in the South and West.
The South, usually a powerhouse, has been dealing with its own set of pressures, perhaps from overbuilding in some spots or lingering affordability challenges. Meanwhile, the Midwest’s relative strength could reflect steadier job markets and more moderate price levels drawing buyers who felt priced out elsewhere.
I’ve always thought regional differences get overlooked in national headlines. What looks like a uniform recovery might actually be a patchwork of local stories—some markets thawing faster than others.
Why Did Buyers Finally Step Up in December?
A few factors converged to create this uptick. Mortgage rates eased noticeably in the fourth quarter, making monthly payments less daunting for many would-be buyers. Combine that with slower price appreciation, and suddenly the math started working better for households on the sidelines.
2025 was another tough year for homebuyers, marked by record-high home prices and historically low home sales. However, in the fourth quarter, conditions began improving, with lower mortgage rates and slower home price growth.
– Chief economist at leading real estate association
That sentiment captures it well. When borrowing costs drop even modestly and prices stop sprinting upward, hesitation turns into action. December’s sales strength after seasonal adjustment underscores how sensitive demand remains to those two variables.
Another angle: some sellers who had been holding out may have decided the time was right to list, adding just enough fresh inventory to facilitate deals without flooding the market. It’s a delicate balance, but it seems to have tipped in buyers’ favor late in the year.
Inventory Tightness Continues to Shape the Market
Even with the sales pop, inventory remains the elephant in the room. Dropping to 3.3 months’ supply means the market is still firmly in seller territory, at least by traditional measures. Anything under four to six months typically favors sellers, and we’re well below that threshold.
Why so low? Many homeowners locked into ultra-low rates from a few years back remain reluctant to trade up or down and face higher borrowing costs. This “rate lock-in” effect has kept listings scarce, perpetuating upward pressure on prices even as growth cools.
Experts suggest more inventory could trickle in starting early this year as seasonal patterns kick in—people often list after the holidays. If that happens, it might ease competition and give buyers more choices without crashing values.
What Does This Mean for Home Prices Going Forward?
The tiny 0.4% annual price increase in December is noteworthy. It’s the 30th consecutive month of year-over-year gains, but the smallest in that streak. This deceleration could signal that the relentless upward march is finally losing steam.
Don’t expect prices to plummet, though. With supply still constrained, any meaningful drop would require a sharp increase in listings or a collapse in demand—neither seems imminent. More likely, we see continued moderation: slower gains, perhaps flat in some markets, with occasional dips where inventory builds.
Perhaps the most intriguing aspect is how this late-2025 momentum sets the stage for 2026. If rates stay cooperative and more sellers emerge, affordability could improve gradually, pulling in buyers who sat out the past couple of years.
Buyer Sentiment and Broader Economic Ties
Housing doesn’t exist in a vacuum. Jobs, wages, consumer confidence—all play into whether people feel ready to commit to a major purchase. The December surge suggests confidence ticked up as year-end approached, perhaps fueled by holiday bonuses, year-end financial reviews, or simply relief that conditions weren’t worsening.
It’s worth noting that even with the uptick, overall activity remains subdued compared to pre-pandemic levels. We’re still far from the frenzy of 2020-2021. This feels more like a tentative thaw than a full-blown recovery.
- Monitor mortgage rate trends closely—they’re often the biggest swing factor.
- Watch early-year listing activity; February-March typically sees a seasonal pickup.
- Consider regional differences when evaluating opportunities—national averages can mask local realities.
- Think long-term; short-term fluctuations don’t always predict sustained change.
- Stay patient—rushing into decisions in a tight market rarely ends well.
These aren’t foolproof tips, but they’ve helped many navigate choppy waters in recent years.
Looking Ahead: Reasons for Cautious Optimism
As we move into the new year, the big question is whether December’s strength carries over. Early signs point to continued improvement if borrowing costs remain reasonable and inventory gradually loosens. Buyers who missed out last year might find 2026 more welcoming, especially if price growth stays tame.
That said, challenges persist. Affordability remains strained for many, particularly first-timers facing down payments and closing costs on top of elevated prices. And any unexpected spike in rates could quickly cool momentum.
Still, the end-of-2025 data offers a glimmer of hope. After years of frustration, the market showed it can surprise on the upside when conditions improve even slightly. For buyers, sellers, and everyone in between, that’s worth paying attention to.
The housing market rarely moves in straight lines, and 2025 proved that yet again. December’s stronger-than-expected finish doesn’t erase the year’s difficulties, but it does suggest the corner might finally be turning. Whether that leads to a broader recovery remains to be seen—but for now, it’s a positive note to close one chapter and open the next.
