Have you ever felt that rush of excitement when you finally find the perfect house, only to watch the momentum fizzle out just as quickly? That’s exactly what happened in the US housing market last December. After months of tentative optimism—lower rates, a few more buyers stepping in—pending home sales took a nosedive that caught almost everyone off guard.
We’re talking about a 9.3% drop from November, the biggest monthly plunge in quite some time. Analysts had hoped for a small uptick, but reality painted a different picture. It’s the kind of news that makes you pause and wonder: is the long-awaited housing recovery slipping away before it even gets going?
Understanding the Sharp Decline in Pending Home Sales
Pending home sales are essentially signed contracts on existing homes—those deals that are close to closing but not quite there yet. They serve as a leading indicator, giving us a peek into what closed sales might look like in the coming weeks or months. So when they fall this hard, it’s hard not to pay attention.
In December, the numbers weren’t just down—they were down across the board. Every major region saw declines month-over-month. The Midwest took the hardest hit with a 15% drop, followed by the West at 13%, the Northeast at 11%, and even the usually resilient South slipped 4%. Year-over-year, things looked a bit better in the South, but overall, sales were still 3% lower than the previous December.
The housing sector is not out of the woods yet. After several months of encouraging signs in pending contracts and closed sales, the December new contract figures have dampened the short-term outlook.
– Chief Economist at the National Association of Realtors
That quote hits home for me. I’ve watched the market ebb and flow over the years, and this feels like one of those moments where hope meets harsh reality. Buyers were starting to feel a little more comfortable, but something shifted in December.
Why Did Buyers Pull Back So Dramatically?
Let’s break it down. First, mortgage rates played a big role. They hovered around 6.25% for much of the month—better than the summer peaks, sure, but still high enough to make monthly payments feel daunting for many. When rates barely budge, buyers hesitate. They wait for that next drop that might never come.
Then there’s the inventory issue. There were only about 1.18 million homes available in December, down 9% from November and matching the lowest level seen all year. That’s painfully low. Buyers want choices—they want to walk through multiple houses, compare, and feel like they’re making an informed decision. When the pickings are slim, enthusiasm fades fast.
- Low inventory discourages browsers from becoming buyers
- Buyers worry about overpaying in a market with few options
- Seasonal slowdowns amplified the drop (holidays, winter weather)
- Ongoing economic uncertainty kept some on the sidelines
In my experience, people tend to need a sense of abundance before committing to such a massive purchase. A tight market breeds caution, not confidence.
Regional Variations Tell a Nuanced Story
Not every part of the country felt the same pinch. The South held up relatively well year-over-year, with some gains in pending contracts. That region has seen more new construction and population growth, which helps keep things moving. But even there, the month-over-month dip was noticeable.
The Midwest and West saw steeper declines, likely tied to colder weather, higher local unemployment concerns in some areas, and fewer affordable options. The Northeast, always a tough market with limited supply, also struggled.
These differences remind us that housing isn’t a one-size-fits-all story. What works in one region might flop in another. Still, the broad decline suggests national forces—like rates and inventory—are weighing heavily everywhere.
Inventory Remains Critically Low
Let’s talk more about that inventory number because it’s central to everything. At 1.18 million homes, supply is up slightly from last year but still nowhere near balanced levels. A healthy market usually has around 4-6 months of supply. We’re sitting at about 3.3 months—better than the ultra-tight days of 2021-2022, but far from ideal.
Why aren’t more sellers listing? Many are locked into low-rate mortgages from the pandemic era. Moving means facing higher rates and potentially higher payments. Others simply don’t want to deal with the hassle in an uncertain economy.
| Metric | December Value | Change from November | Change from Last Year |
| Pending Home Sales | Down 9.3% | Sharp decline | Down 3% |
| Inventory | 1.18 million homes | Down 9% | Up 12% |
| Days on Market | 39 days | Up from 35 days | Slight increase |
| Mortgage Rates (30-year) | Around 6.25% | Stable | Lower than peaks |
This table shows how interconnected these factors are. Low inventory leads to longer days on market, which in turn makes buyers nervous, leading to fewer contracts.
The Broader Economic Context
Beyond rates and supply, there’s a layer of economic uncertainty. Job market worries, inflation lingering in the background, and general consumer caution all play a part. People aren’t rushing into major purchases when the future feels foggy.
Interestingly, closed sales actually picked up in December, thanks to those contracts signed earlier in the fall when rates were dipping. But new contracts? They dried up. That mismatch is what makes this report so telling for the months ahead.
What Does This Mean for the 2026 Housing Outlook?
Short-term, the news isn’t great. The sharp drop dampens hopes for a quick rebound in early 2026. If January and February follow suit, we could see slower sales through the spring buying season.
But let’s not despair entirely. Many economists still expect modest improvement over the course of the year. Rates could ease further, more inventory might trickle in as more sellers feel comfortable listing, and wage growth could help affordability.
- Watch for any further rate declines—every quarter-point helps
- Monitor new listings in spring— that’s when supply usually surges
- Keep an eye on regional differences—some areas may recover faster
- Consider economic indicators like employment and consumer confidence
In my view, 2026 won’t be a boom year, but it could be a year of gradual stabilization. Buyers who are patient and prepared might find better opportunities than in recent years. Sellers, on the other hand, may need to adjust expectations and price more realistically.
Advice for Buyers in This Environment
If you’re thinking about buying, don’t let this report scare you off completely. Focus on getting pre-approved, saving for a solid down payment, and being flexible on location or features. Sometimes the best deals come when the market cools a bit.
Also, work with a knowledgeable agent who knows your local market inside out. They can help you spot opportunities before they go viral.
Final Thoughts: Patience Will Be Key
The December drop in pending home sales is a wake-up call. The housing market isn’t fixed yet, and challenges remain. But markets are cyclical, and shifts like this often precede recovery.
Perhaps the most interesting aspect is how interconnected everything is—rates, supply, buyer psychology, the economy. One positive change (like a rate cut or inventory surge) could spark momentum again. Until then, stay informed, stay patient, and keep your options open.
What do you think? Has this report changed your plans for buying or selling in 2026? Share your thoughts below—I’d love to hear from you.
