CHICAGO, Illinois, November 13, 2026 — Existing home sales in the United States reached a 16-year low for the year, based on figures provided by the National Association of Realtors. Housing affordability has been a major factor that has slowed down home purchasing; this is because mortgage interest rates continue to remain at very high levels, and the cost of homes remains high as well.
First-time home buyers were essentially shut out of the housing market due to the rapid increase in monthly housing costs compared to the average income per household. Real estate brokerages had to close down because they were losing so much business that many agents were laid off and operations consolidated.
Market Restriction and Regional Stagnation
The real estate market was very restricted in terms of available homes for sale due to homeowners with extremely low mortgage rates not being willing to give up these rates. The combination of high prices, a lack of inventory, and high borrowing costs led to an unusually stagnant real estate market.
The same types of stagnation occurred in the regional markets of both the Northeast and Midwest, which was unlike what usually happens during this time of year. Some economists referred to the current housing market as being in a state of extreme structural gridlock.
Industry Revenue Declines and Diversification
The title insurance industry, mortgage lenders and moving companies have had a substantial decline in revenue due to the overall decrease in the real estate sector. The local government has experienced an unforeseen budget shortage caused by a decrease in real estate transfer taxes that will require fiscal changes.
In response to decreasing commission revenues, real estate professionals expanded their offerings in property management and rental advisory services. As a result of record-low levels of affordability indexes for housing, there was a great deal of discussion in the community about the systemic socio-economic inequalities that are preventing the accumulation of wealth across generations.
Mortgage Rates and Affordability Pressures
The most significant contributor to the current historical housing decline has been the higher-than-average mortgage interest rates created by the Federal Reserve’s monetary policies. Potential homebuyers are experiencing borrowing costs that are twice as high as those experienced at the lowest levels of the previous housing boom which occurred during the COVID-19 pandemic.
Due to the continuing lack of available homes (undersupply) in both the suburbs and cities, median prices of existing homes remained close to their all-time high. Calculations of mortgage payments showed that home ownership expenses were consuming an historically large percentage of each month’s total gross income for most buyers.
Rental market pressures continued to increase due to the fact that many prospective buyers were still renting their homes. In addition to being advised by financial advisors to aggressively save for a down payment and optimize their credit scores, prospective home buyers have been experiencing an increasing amount of competition from other potential home buyers. This competition has led to higher rents in most areas.
Housing market professionals have said that even small changes in interest rates will directly affect how many people contact you about buying a home. High costs of living have led to requests for new ways of paying for homes through creative financing methods and for the government to help support the housing industry.
The economic researchers studied the debt-to-income ratio of households and warned that the high burden placed on families by their housing costs was preventing consumers from spending money at stores and restaurants in the retail and hospitality industries. Commercial banks increased the requirements for approval of mortgages, requiring larger down payments, higher credit scores and greater amounts of money in savings accounts.
In an attempt to decrease their monthly debt payments, prospective homebuyers have been turning to adjustable-rate mortgages (ARMs) and seller-financed deals. At the same time, government-sponsored housing organizations are considering whether to implement special assistance programs for teachers, nurses, and first responders who are unable to find affordable housing within their communities.
Inventory Constraints and the Lock-In Effect
A hallmark of today’s real estate market has been a major shortage of available homes due to the mortgage rate lock-in. Millions of U.S. homeowners obtained low mortgage rates (below 4%) when they refinanced in years past.
The cost of selling their home will increase substantially if they choose to buy another property with a loan that has high interest rates. This is due to the increased cost of financing the new purchase. Because of this, many homeowners have chosen to stay put and wait for lower interest rates before attempting to sell. This has led to record low levels of inventory turnover in the housing market, causing frustration for both home builders and potential homebuyers.
Residential construction companies made an effort to alleviate the inventory shortage through increased production of single-family homes. However, residential construction companies were faced with ongoing supply chain constraints, labor shortages, and regulatory barriers to development in local communities.
Real estate professionals stated that in order to solve the problem of the structural housing shortage, there will need to be millions of additional completed homes built within every single price range. Also, local municipalities were under increasing pressure from politicians to change their land use regulations (zoning), as well as to simplify the approval process for building new residential properties.
Many of the architectural firms specializing in modular and prefabricated housing have seen an increase in developer interest for their services as they seek to achieve cost savings during the process of building homes. In addition, many real estate investment trusts have bought up large numbers of single-family rental properties. This will enable these trusts to position themselves to take advantage of the growing demand for rental housing.
The municipality’s planning commission held public hearings on the implementation of inclusionary zoning regulations that would promote the development of affordable, multi-family housing units. However, regardless of local efforts to address the issue, the national housing shortage continues to exist and will prevent a significant decrease in prices for potential home buyers.
Economic Ripple Effects and Future Outlook
The lengthy period of sluggishness in existing-home sales had a significant impact on other areas of the economy as well as on local governments’ revenues. Retailers who sell furniture, hardware stores, and moving services experienced lower levels of business due to the decline in real estate transactions.
The budget shortfall experienced by the municipalities was due to their high dependency upon both the real estate transfer tax and the property assessment. There has been an ongoing debate among real estate economists regarding whether or not a slight reduction in interest rates by the Federal Reserve could potentially stimulate increased market activity in the near future.
The long-term need for housing will continue to be strong due to the demographic trend of millennials starting families. However, there must be significant improvements in affordability to turn the demographic need into sales.
At the same time as policymakers from all three levels of government are discussing possible legislative remedies to bring back access to the housing market; until there is a drop in mortgage interest rates and/or a substantial increase in housing inventory available for purchase, the U.S. housing market will likely continue to experience slower activity.
Housing economists and real estate executives will watch the coming employment reports and inflation data to find indicators of how much money is going to be loosened up in terms of the monetary policy trajectory. Housing affordability has been ranked as a major issue facing the United States in the eyes of voters going into the next legislative session according to consumer sentiment surveys.
The current difficult real estate environment will require strategic patience, and creative financing structures for buyers, sellers, and all of the professionals involved with the real estate industry.
