Green Shoots in the Housing Market

As the calendar flips toward the holidays—traditionally the housing market's quietest period—a surprising narrative is emerging from recent economic data. Despite seasonal headwinds, several key indicators suggest that prospective homebuyers may be entering a more favorable environment than we've seen in years.

Mortgage Rates Hit Three-Year Lows

The headline story is mortgage rates. According to Freddie Mac's latest weekly report, the 30-year fixed-rate mortgage fell to 6.23% this week, down from 6.26% the previous week and significantly below the 6.81% rate from a year ago. Mortgage News Daily, using different criteria, recorded an even more dramatic shift, with rates hitting 6.22% on November 26—approximately the lowest level in three years.

But before homebuyers get too excited, experts are urging caution about expecting additional dramatic drops.

"It is looking increasingly likely that the Fed will cut interest rates when it meets on December 10. However, we should not expect that to translate into a big drop in mortgage rates," cautioned Lisa Sturtevant, chief economist at Bright MLS.

The Data That Could Drive Momentum

The coming weeks may prove critical for the housing market's trajectory. With investors growing increasingly confident about another Federal Reserve interest rate cut before year's end, mortgage rates could edge down slightly further before the central bank's December meeting.

Another wildcard is the anticipated release of backlogged government data. Recent jobless claims fell to a seven-month low, providing one piece of positive economic news. However, the Bureau of Labor Statistics announced it will not be releasing full labor market or inflation reports for October due to data lapses caused by the federal government shutdown. The agency is expected to release November data after the Fed's December meeting.

Jake Krimmel, Senior Economist at Realtor.com, painted an optimistic picture if multiple factors align: "If inflation cools, the labor market rallies and the Fed delivers another cut, the housing market could enter 2026 with real momentum."

Buyers Are Showing Up

Despite the approaching holiday slowdown, mortgage applications are demonstrating resilience. The Mortgage Bankers Association reported that the seasonally adjusted purchase index for the week ending November 21 rose 8% from the previous week. Even more striking, government loan applications—including FHA, VA, and USDA loans—jumped 9% and "had the strongest week since 2023," according to Joel Kan, MBA's vice president and deputy chief economist.

Price Relief on the Horizon?

Perhaps the most encouraging news for buyers is emerging on the pricing front. While many studies indicate slower home price growth, the price per square foot has actually dropped 1.5% compared to a year ago, according to Mike Simonsen, chief economist at Compass. His November 24 estimate placed the asking price per square foot at $210.60, continuing a steady decline since dipping below 2024 levels in September.

"Home prices are really the story of the moment," Simonsen noted in his weekly YouTube update. "Supply is big enough—and demand has been light enough for long enough—that many indicators of home prices have been ticking down."

Simonsen also warned that price changes can reverse quickly when demand shifts, particularly in local markets as mortgage rates fall. With price reductions currently at high levels across most of the country, the stage could be set for renewed price pressures next spring.

The Winter Slowdown Arrives

Not every indicator is flashing green. While pending sales increased in October, Redfin data suggests that momentum stalled in November. Signed contracts declined 2.1% year-over-year during the four weeks ending November 23—the biggest annual decline in eight months.

Redfin's Homebuyer Demand Index, which tracks home tours and other buyer activity indicators, fell to its lowest level in two months. However, there's a silver lining: Google searches for "homes for sale" hit the highest level since August, suggesting that buyer interest remains strong even if immediate action has paused.

The Bottom Line

As we enter what's typically the housing market's quietest season, the fundamentals are quietly shifting in ways that could benefit buyers. Lower mortgage rates, moderating prices, and strong application activity suggest underlying demand that could accelerate when conditions improve further.

For prospective homebuyers, this winter may be the ideal time to get serious about house hunting—preparing finances, getting pre-approved, and positioning for what many economists believe could be a more competitive spring market. The window of opportunity may be narrower than it appears.