Decoding the Pending Home Sales Surge: A Regional Reset, Not a Boom

The housing market's leading indicator delivered a surprising jolt in November. Pending home sales, a forward-looking measure of contracts signed, jumped , marking the strongest performance in nearly three years. This unexpected surge, which beat economist forecasts by a wide margin, signals a temporary lift in buyer confidence. The core driver is a tangible improvement in affordability. Mortgage rates have eased, with the average 30-year fixed rate near a . More importantly, wage growth is now outpacing home price increases, giving potential buyers more purchasing power.

Yet this bounce masks persistent underlying softness. The broader health of the market remains weak. Homes are staying on the market longer, with the average time up . Prices are also easing, . This combination indicates that affordability pressures are still real and that the market is not yet in a strong, self-sustaining uptrend. The November data appears to reflect a seasonal pickup in activity as buyers test the market during a period of improving conditions, not a fundamental shift in momentum.

The regional picture is starkly uneven, highlighting the market's deep divisions. , far outpacing the other three regions. , , respectively. This divergence underscores that the November strength is concentrated in specific areas, likely driven by local inventory dynamics and economic conditions, rather than a nationwide recovery. For investors and economists, the takeaway is clear: the November data shows a regionalized bounce fueled by improving affordability, but the core market remains sluggish and vulnerable to any reversal in those conditions.

The 2026 Forecast: A Slow, Regionalized Recovery

The housing market's long-awaited reset is finally taking shape. After years of being priced out, buyers will see a gradual improvement in affordability in 2026, but the recovery will be slow and deeply uneven. Economists project a year of measured national growth, with existing home sales rising only and mortgage rates averaging . This is not a rebound, but a reset-a yearslong period of normalization where affordability slowly improves as income growth outpaces home-price gains for the first time since the .

The national price trend will be muted, . This aggregate figure masks a stark regional split that will define the market. The Northeast and Midwest are forecast for stronger performance, driven by persistently constrained inventory and stable fundamentals. . In contrast, the Sun Belt faces moderation or softening. Florida, Texas, and Arizona, which saw extreme pandemic-era growth, now confront elevated climate risk, rising insurance costs, and a normalization of migration patterns. These factors are creating headwinds that could lead to flat or even negative price movement in major metros.

This divergence is already evident in the data. While active listings are up , the growth in supply is slowing for the 25th consecutive month, signaling a plateau. More critically, delistings are outpacing inventory gains, a risk that could tighten supply in already constrained markets. Buyer activity remains soft, with homes staying on the market longer and prices easing slightly. The slowdown is most pronounced in the South and West, while many Northeast and Midwest metros still see faster-than-normal sales due to tighter inventory.

For investors and homeowners, the 2026 setup is one of selective opportunity. The strategy must shift from chasing momentum to prioritizing fundamentals. The most compelling returns will likely come from value markets in the Midwest and resilient Northeast, where affordability, balanced supply, and economic stability support steady appreciation. The Sun Belt, by contrast, represents a market of mean reversion, where cash flow generation and due diligence on climate risk will be paramount. The bottom line is a market that rewards patience and regional analysis, not broad bets.

Catalysts, Risks, and What to Watch

The 2026 housing reset hinges on a delicate interplay of monetary policy, consumer behavior, and deep-seated regional imbalances. The primary catalyst is the Federal Reserve's path, but its influence on the key variable-mortgage rates-is indirect and uncertain. The Fed has already cut rates three times in 2025, and while this sets a tone for lower borrowing costs, it does not guarantee a meaningful drop in mortgage rates. Those rates are more closely tied to long-term Treasury yields, which reflect market expectations for inflation and economic growth. Experts note that a notable decline in mortgage rates is more likely if inflation continues to cool and the economy shows signs of slowing, . However, , even if the Fed continues cutting.

A key risk is that improved affordability draws back some buyers, but not enough to overcome the persistent 'lock-in' effect. Millions of homeowners remain anchored by ultra-low mortgage rates secured during the pandemic, creating a structural supply constraint. This dynamic means that even a slight drop in rates may not trigger a massive wave of new buyers. Instead, it could fuel increased competition for the limited inventory that does come on the market, potentially limiting the actual relief borrowers see. As one forecast warns, "waiting for the Fed to act generally isn't a great homebuying strategy" because the market may simply become more competitive.

The forward trajectory will be defined by two diverging forces. First, national inventory is projected to continue rising, which should provide more choice for buyers and ease pressure on prices. Second, the divergence between 'refuge markets' and 'refugee markets' is expected to intensify. Markets in the Northeast and Midwest, where inventory remains constrained and fundamentals are stable, are forecast for stronger price appreciation, . In contrast, many Sun Belt markets that saw rapid pandemic-era growth now face moderating conditions and potential price corrections as new construction flows through the pipeline. The bottom line is a market that is slightly more favorable for buyers nationally, but one where the benefits will be highly uneven, favoring those who can navigate the regional split.