More home buyers are going under contract as lower mortgage rates help improve housing affordability conditions.
When mortgage rates started to drop this fall, home buyers took notice. More consumers are stepping back into the housing market, and contract signings are on the rise. Those lower rates also have been credited with fueling three consecutive months of gains in existing-home sales. Economists are hopeful that the momentum will continue into the 2026 housing market.
The National Association of REALTORS®’ newly released Pending Home Sales Index—a forward-looking indicator of home sales based on contract signings—showed that contract signings climbed 3.3% in November compared to October and are up 2.6% from a year ago. The strongest growth occurred in the West, where contract signings surged 9.2% month over month, followed by a 2.4% increase in the South. More modest gains were posted in the Northeast and Midwest by 1.8% and 1.3%, respectively. In October, it was the Midwest that led the way with a 5.3% increase in pending sales over September.
“Home buyer momentum is building,” says Lawrence Yun, NAR’s chief economist. “The data shows the strongest performance of the year after accounting for seasonal factors, and the best performance in nearly three years, dating back to February 2023. Improving housing affordability—driven by lower mortgage rates and wage growth rising faster than home prices—is helping buyers test the market. More inventory choices compared to last year are also attracting more buyers to the market.”
Although housing inventories have shown signs of tightening during the winter—NAR’s data showed a 6% month-to-month drop in November—inventory is still about 8% higher than a year ago, giving buyers more options than they’ve had in years.
Housing Gets More Affordable
Housing affordability improved this fall as median family incomes increased, and mortgage rates declined, NAR’s Housing Affordability Index shows. These factors also helped to offset still-rising home prices, which increased to a median existing home price of $409,200 in November.
The monthly mortgage payment on the median-priced home has fallen from a peak in June thanks to declining mortgage rates.
The 30-year fixed-rate mortgage averaged 6.24% in November, according to Freddie Mac. Buyers’ extra attention to rates also shows up in the mortgage application data: Applications for home purchases—another gauge of future home sales—have posted double-digit annual gains over recent weeks.
Real estate professionals are seeing the same pattern emerge locally: When mortgage rates drop, home buyers return.
“The affordability issue has been holding a lot of buyers back the last three years, and mortgage rates coming down is a way of resolving a lot of that pain,” says Brad O’Connor, chief economist at Florida REALTORS®, who noted a turnaround in Florida with pending home sales starting to rise as mortgage rates dropped this fall. “If it’s possible to get mortgage rates under 6%, that would really go a long way toward reigniting the housing market.”
Looking ahead, NAR forecasts that mortgage rates could average 6% in 2026—a notable improvement from roughly 7% at the start of 2025. That one percentage point drop in rates, from 7% to 6%, could bring about 5.5 million additional households, including 1.6 million renters, into the pool of potential buyers for 2026, NAR research shows.
“Copyright NATIONAL ASSOCIATION OF REALTORS®. Reprinted with permission.”
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