December is one of the most important months for evaluating where the housing market and mortgage rates may be heading in early 2026. Several major economic reports this week will help shape expectations for interest rates, buyer demand, and pricing in the first quarter of the year.
This condensed housing market update highlights the key data points that matter for buyers, sellers, and investors right now.
Jobs Data and Inflation: What They Mean for Mortgage Rates
This week brings a range of influential economic releases including the ADP Employment Report, Jobless Claims, multiple Purchasing Managers Index readings, and the delayed September Personal Consumption Expenditures report, the Federal Reserve’s preferred inflation measure.
These indicators directly influence mortgage rate trends and overall housing affordability.
How the Data Impacts Rates
Strong jobs data generally puts upward pressure on mortgage rates, while softening labor numbers tend to support lower rates. Lower inflation readings also increase the likelihood of upcoming rate cuts.
As of early December, markets are pricing in a high probability of a rate cut at the next Federal Reserve meeting, which could bring added relief to homebuyers.
Housing Market Trends: Prices, Demand, and Inventory
Home prices remain higher than they were last year, with a 1.7 percent increase year over year. Month to month appreciation has slowed but is still positive, which reflects a steady and more balanced housing market.
Pending home sales rose 1.9 percent in October, suggesting stronger buyer activity heading into winter. Although pending sales remain slightly lower year over year, the month to month increase indicates a healthier pace of accepted offers and more closings ahead.
Inventory currently sits at 4.4 months of supply, which is considered normal. This balance between supply and demand has helped keep home prices stable and avoid the significant declines some predicted earlier in the year.
Mortgage applications were up 20 percent year over year before Thanksgiving, signaling that buyers are returning to the market as rates ease.
Where Buyers Are Finding the Best Deals Right Now
The most negotiable listings in today’s market are homes that have been sitting longer than average. About one in five properties has had a price reduction this year, reflecting seller willingness to adjust expectations.
Sellers with older listings are typically more open to negotiating on price, closing cost credits, repairs, and other concessions. Even small discounts can make a meaningful impact, especially on median priced homes.
For buyers planning to purchase in 2026, this is a strategic moment to stay active and pursue opportunities that other buyers may be overlooking.
Looking Ahead to 2026: Mortgage Rates and the Next Federal Reserve Chair
Mortgage rate trends in 2026 will be heavily influenced by the appointment of the next Federal Reserve Chair. Each leading candidate has a different approach to inflation and interest rate policy.
Some candidates support faster rate cuts, which could bring mortgage rates into the mid five percent range. Others prefer a gradual approach, easing rates more slowly throughout the year. Regardless of who is chosen, mortgage rates are broadly expected to decline in 2026, improving affordability and strengthening housing demand.
Key Takeaway for December 2025
The December 2025 housing market remains stable despite mixed economic signals. Prices are steady, buyer demand is improving, and mortgage rates are gradually trending lower. This week’s job data, inflation reports, and consumer sentiment readings will be important in setting the tone for the first quarter of 2026.
For anyone planning to buy or sell next year, understanding these shifts will help you navigate timing, strategy, and pricing more confidently.