Core Insights - Home sales are expected to remain low in 2025 due to high housing costs and elevated mortgage rates, but slight improvements in affordability are anticipated for 2026, potentially creating opportunities for buyers [2][4] Mortgage Rates - Mortgage rates peaked at over 7% in early 2025 but eased to around 6.2% in the latter half of the year, providing some relief to buyers [3] - Experts predict mortgage rates will stabilize between 6% and 6.5% in 2026, with a modest decline expected to improve affordability [5][6] - The Federal Reserve has reduced interest rates by 1.75 percentage points since September 2024, but mortgage rates have not decreased correspondingly, indicating a disconnect between short-term and long-term rates [6][7] Housing Market Trends - Housing prices vary significantly across the U.S., with coastal and Northeast cities remaining high-cost areas, while some Southern and Midwestern cities offer more affordable options [8][9] - Cities like Cleveland, Cincinnati, and Detroit are highlighted as having more reasonable housing prices despite experiencing faster growth rates [9][10] Financing Options - The popularity of adjustable-rate mortgages (ARMs) is increasing, with about 10% of borrowers opting for them in September, compared to a historical average of 6% [11] - ARMs can provide lower initial rates, making them an attractive option for buyers facing affordability challenges [12][13] New Home Sales - Sales of newly constructed homes are outpacing existing homes, with new homes sold at an average price of $413,500, compared to $422,600 for existing homes [14][15] - Builder incentives, such as mortgage rate buy-downs and reduced closing costs, are making new homes more competitive in pricing [16]