Housing market ‘stuck in neutral’ as rates, price growth flatten
Mortgage rates are holding steady, but purchase applications and pending sales are down as economic and political tensions heighten consumer uncertainty.
Key points:
- Mortgage rates stayed nearly flat this week, rising just one-tenth of a percentage point to 6.1%.
- Where rates head next could determine the fate of spring sales — and in the near term, some economists expect them to go up.
- Purchase and refinance applications fell last week, but overall applications were up 18% year-over-year — a sign that buyers may be more active in 2026.
- While affordability is improving, continuing home price growth is leaving many buyers and sellers deadlocked.
Though mortgage rates held relatively steady through the first month of 2026, the fate of the spring homebuying season may depend on whether that trend of improving affordability continues — and on how the economy and consumers respond to other issues facing the country.
Rates sticky following Fed meeting
Mortgage rates are near three-year lows, and they didn't change much after the Federal Reserve decided to pause short-term interest rate cuts at its meeting this week.
The 30-year fixed-rate mortgage ticked up just slightly, rising from 6.09% last week to 6.1%, according to Freddie Mac's weekly survey. Mortgage News Daily, which uses a different set of metrics to gauge mortgage rates, pegged the rate at 6.16% on Jan. 29 — unchanged from one day earlier.
While rates are significantly lower than they were a year ago, "expectations for a robust spring housing market depend a lot on where mortgage rates head," said Lisa Sturtevant, chief economist at Bright MLS.
"It will be movement, perhaps more than the actual level, that prospective homebuyers will be responding to," Sturtevant added.
Mortgage rates could rise in the near term
The recent uptick in mortgage rates "reflects political and economic uncertainty that has driven Treasury yields higher," Sturtevant said.
That uncertainty may also "continue to hold buyers and sellers back," Sturtevant noted, and will "be an important factor in rate trajectory, leading to rate volatility and probably higher rates in the weeks ahead."
But that doesn't mean we'll see rates in the 7% range anytime soon, according to Mike Fratantoni, Mortgage Bankers Association (MBA) SVP and chief economist. Fratantoni anticipates that mortgage rates will stay around 6-6.5% "for the foreseeable future," which will in turn "help support a somewhat stronger spring housing market than last year, but not a breakout year."
Applications fall, but buyers 'remain active' compared to 2025
On a weekly basis, overall mortgage applications dropped 8.5% for the week ending Jan. 23, according to the MBA, while refinance applications fell 16% amid a short-lived spike in mortgage rates.
Homeowners seeking opportunities to refinance will likely "remain sensitive to week-to-week rate movements," noted MBA VP and Deputy Chief Economist Joel Kan.
Purchase applications dropped 4% week-over-week in a sign that "consumers are reacting to growing uncertainty," Sturtevant said. But purchase applications were still 18% higher than this time last year, indicating that "prospective homebuyers remain active at the start of 2026," according to Kan.
New listings up as homes linger on market
Buyers canceled home purchase agreements at a record pace last month — and pending sales also fell 1.6% for the four weeks ending Jan. 25, according to Redfin data. But new listings increased 0.8%, marking the first rise since November as buyer demand improves.
While homes are taking more time to sell — the typical home sold in January spent 63 days on the market, a full week longer than this time last year — buyers "are more serious than they were a few months ago; they're looking at every listing and meticulously comparing the pros and cons of each one," observed Connie Durnal, a Redfin Premier agent in Dallas.
With many major U.S. markets favoring buyers, home shoppers "are able to take their time and be picky because there are a lot of listings," Durnal said, adding that sellers who must move "need to be realistic."
Slow and steady price growth
Home price growth has continued to increase, though at a modest pace.
Price growth estimates vary, with the latest S&P Cotality Case-Shiller Home Price Index pegging the November 2025 year-over-year increase at 1.4% and the Federal Housing Finance Agency reporting a slightly higher uptick of 1.9%. First American's estimate was lower at 0.5%, while ATTOM said 2025's national median sale price was 2.6% higher than in 2024.
These price increases occurred despite ongoing affordability challenges, noted ATTOM CEO Rob Barber. While lower mortgage rates may be giving home shoppers an opening, "that relief may be limited" as prices hit record highs and homeowners stay put longer, he added.
Affordability improvements coming?
For now, "the housing market is stuck in neutral" as affordability remains a top concern for many consumers, according to Cotality Principal Economist Thom Malone. "Buyers can't meet the prices sellers need to preserve their equity or move laterally," he noted, leaving both sides "at an impasse."
But recent economic data suggests the situation is starting to get better. Housing affordability improved for the ninth consecutive month in November, according to First American, with recorded gains in 47 of the 50 major metros analyzed.
With improvements in wage growth and steady mortgage rates expected in 2026, First American anticipates that home price growth and housing supply will shape the conversation about affordability.