There appears to be some good news on several fronts for the housing market as we move into 2026. The biggest development is that, by the end of 2025, the long-feared “lock-in” effect tied to mortgage rates has finally begun to fade.

The End of the Mortgage Rate Lock-In Effect

During the pandemic era, many homeowners secured historically low mortgage rates below 3%. Compared to today’s rates of 6% or higher, these homeowners felt locked into their existing homes and were unwilling to trade up to larger or newer properties with much higher monthly payments.

The combination of higher home prices and sharply higher interest rates made moving financially unrealistic for many households. That dynamic has now shifted.

Over the past four years, the share of homeowners with mortgage rates above 6 percent has quadrupled. There are now more homeowners with rates above 6 percent than those with rates below 3%. This change alone should help unlock pent-up demand.

According to Mike Simonsen, chief economist for the real estate brokerage firm Compass, there are approximately 150,000 “shadow demand” homeowners. These are people who wanted to move over the last four years but delayed their plans because they felt locked in by low mortgage rates.

Inventory Levels Are Improving

Another encouraging factor for buyers is that inventory levels are roughly 20% higher than they were a year ago. Increased inventory reduces pressure on buyers and provides more options when searching for a home.

The Shift Toward a Buyer’s Market

The market environment has also shifted away from a strong seller’s market and toward a more balanced, buyer-friendly one. More sellers are offering price reductions and concessions, and many lowered their prices throughout 2024.

According to Zillow, home buyers were receiving record-high discounts of $10,000 or more by the end of 2025. In some cases, sellers offered multiple price cuts, resulting in total discounts of $25,000 or more.

New Home Construction Is Becoming More Competitive

The new home market is also showing positive signs. Builders are focusing on smaller, more affordable homes while offering price cuts and incentives.

As of December 2025, about 40%of builders were cutting prices, and roughly two-thirds were offering buyer incentives. Many builders are also offering financing incentives, and some are introducing a new benefit by including solar features at no cost to the buyer, with the builder absorbing the expense.

If you are purchasing a home in a new community, around 60% of builders are offering incentives on homes that are still to be built. That number increases to nearly 79% for quick move-in homes, which are already completed and ready for sale.

These incentives have created an unusual market condition in which the average cost of a new home is now lower than that of an existing home. This has occurred only twice in the past three decades.

What This Means for Home Sales in 2026

All of these factors point to stronger home sales ahead. Lawrence Yun, chief economist for the National Association of Realtors, is forecasting that home sales will increase by approximately 14% in 2026.

We believe this is critical information for anyone considering purchasing a home. Do your homework. There are more options available today than there have been in years to secure a good price and favorable terms.

Good luck, and as always, we will continue to keep you informed.