Lower rates, cooling prices prompt cautious optimism for buyers 

The latest batch of economic data is signaling a bumpy winter for real estate, making it tricky to predict what the spring homebuying season will look like.

Mortgage rates inched higher this week but remain around the lowest levels of the past three years. The 30-year fixed-rate mortgage averaged 6.09% as of Jan. 22, according to Freddie Mac's weekly survey — up from 6.06% one week earlier but much lower than a year ago, when the rate averaged 6.96%.

The 30-year rate dipped briefly below 6% earlier this month after President Donald Trump directed Freddie Mac and Fannie Mae to buy $200 billion in mortgage-backed securities. However, rates reversed direction when Trump floated the idea of seizing Greenland, a proposal that intensified international tensions.

Pending sales slump, mortgage applications rise

Even with lower rates, the housing market is facing mixed signals when it comes to homebuyer demand. Pending home sales dropped 9.3% from November to December and 3% year-over-year, according to the National Association of Realtors.

But mortgage applications have been rising. For the week ending Jan. 16, overall applications were up 14.1% compared to the week before, according to the Mortgage Bankers Association. Much of that uptick was driven by refinance applications, although the seasonally adjusted purchase index was also up 5% from the previous week and the unadjusted purchase index was 18% higher than a year ago.

Sam Williamson, senior economist at First American, noted that December is a tough month for gauging market conditions because of the winter holidays and weather.

"For now, we remain cautiously optimistic that the recent pullback in rates and cooling price growth will support a more constructive year ahead for home buyers — driven more by 'life happens' events such as job changes, marriages, and growing families than by further declines in mortgage rates," Williamson said.

Conflicting messages on home sales

Meanwhile, Fannie Mae is tempering its home sales expectations. While Fannie Mae's January forecast for overall homes sales in 2026 predicted a healthy 6.9% increase, that is down from its earlier forecasts in November (which predicted a 7.3% uptick this year) and September (which predicted a 9.2% increase).

However, weekly data suggests there was a recent rise in home sales activity. Though down for the month of December, pending sales last week were up 11% year-over-year, according to Mike Simonsen, chief economist at Compass.

"But one week is not a trend," and "any bullishness we see is probably very fragile," he said. Rates weren't as favorable a year ago, he added, so the year-over-year increase in pending sales doesn't come as a surprise.

Buyers in the driver's seat?

In its weekly report, Redfin noted that days on the market hit 61 for the typical home that sold — a week longer than this time last year and the longest in about three years. That rise is giving buyers more leverage than they've had over the past few years, according to Ben Ambroch, a Redfin Premier agent in Milwaukee.

"A lot of buyers are giving up a 3% mortgage rate for a 6% rate, so they have high standards for their new home," Ambroch said in a news release accompanying Redfin's data.

"Buyers are negotiating prices and asking for repairs based on inspections," he added. "Sellers are more willing to compromise because listings have been sitting on the market longer; the sellers who need to move are eager to get a deal done."

Another factor giving buyers leverage? The housing market's current supply-demand balance. With an estimated 1.34 million homebuyers in December, Redfin estimated that sellers outnumbered buyers by about 47% — the largest gap since at least 2013.