The US housing market is currently defined by a stark divergence between transaction volume and equity performance. While existing home sales have retreated to a seasonally adjusted annual rate of 3.91 million, the underlying market regime remains stable. Elevated mortgage rates at 6.11% continue to lock in homeowners, keeping inventory tight at just 3.7 months of supply.
| Region | Sales (SAAR) | Share |
|---|---|---|
| South | 1,810,000 | 46.3% |
| West | 700,000 | 17.9% |
| Midwest | 920,000 | 23.5% |
| Northeast | 480,000 | 12.3% |
| US Total | 3,910,000 | 100% |
Existing home sales plummeted 10.1% in January 2026 to a 3.91 million annual pace, marking a significant slowdown in turnover. The South remains the most active region with 1.81 million sales, while the Northeast saw the lowest volume at 480,000. Total housing inventory stands at 1.22 million units, maintaining a seller's market with a 3.7-month supply. This lack of liquidity is a direct result of the lock-in effect as owners avoid trading up into higher mortgage rates.
| Metric | Value (000s) | MoM | YoY |
|---|---|---|---|
| Housing Starts (Total) | 1,246 | -4.6% | -7.8% |
| Housing Starts (SF) | 874 | +5.4% | -7.8% |
| Building Permits (Total) | 1,411 | -0.3% | -1.2% |
| Building Permits (SF) | 878 | -0.2% | -9.2% |
Housing starts fell 4.6% month-over-month to 1.246 million units, reflecting a cautious stance among developers despite strong stock performance. Single-family starts accounted for 874,000 of these units, showing a continued preference for detached housing over multi-family projects. Building permits, a leading indicator of future activity, declined 1.2% year-over-year to 1.411 million. This suggests that while builders are profitable, they are managing supply carefully to maintain pricing power.
| Month | EHS (M) | Median Price | Inventory | Months Supply |
|---|---|---|---|---|
| 2026-01 | 3.91M | $396,800 | 1,220,000 | 3.7 |
| 2025-12 | 4.35M | $405,400 | 1,180,000 | 3.3 |
| 2025-11 | 4.14M | $410,000 | 1,440,000 | 4.2 |
| 2025-10 | 4.11M | $414,900 | 1,520,000 | 4.4 |
| 2025-09 | 4.05M | $412,300 | 1,530,000 | 4.5 |
| 2025-08 | 4.00M | $422,400 | 1,530,000 | 4.6 |
| 2025-07 | 4.01M | $425,700 | 1,550,000 | 4.6 |
| 2025-06 | 3.93M | $432,700 | 1,540,000 | 4.7 |
| 2025-05 | 4.04M | $423,700 | 1,540,000 | 4.6 |
| 2025-04 | 4.00M | $414,000 | 1,450,000 | 4.4 |
| 2025-03 | 4.02M | $403,100 | 1,330,000 | 4.0 |
| 2025-02 | 4.27M | $396,800 | 1,230,000 | 3.5 |
| Metric | Value | YoY Change |
|---|---|---|
| NAR Median Price (US) | $396,800 | +0.9% |
| West | $600,400 | - |
| Northeast | $505,400 | - |
| South | $351,200 | - |
| Midwest | $295,400 | - |
| Case-Shiller National | 330.4 | +1.4% |
| 30-Year Mortgage | 6.11% | Elevated |
The national median home price rose slightly to $396,800, a 0.9% increase year-over-year that underscores the lack of price correction despite low volume. The Case-Shiller National Index reached 330.4, placing home prices in the 96th percentile of historical data. Mortgage rates are currently 6.11%, sitting near the bottom of their 52-week range but still high enough to limit buyer pool expansion. Affordability remains the primary headwind for first-time buyers, particularly in the West where median prices hit $600,400.
Regional price disparities are widening, with the West maintaining the highest median price at $600,400 followed by the Northeast at $505,400. The Midwest remains the most affordable region at $295,400, while the South offers a middle ground at $351,200. Volume-wise, the South dominates the market, accounting for nearly half of all existing home sales in the country.
Periods when existing home sales were within ±10% of current level:
| Date | EHS (SAAR) | Diff |
|---|---|---|
| 2025-10 | 4,110,000 | +5.1% |
| 2025-04 | 4,000,000 | +2.3% |
| 2024-10 | 4,030,000 | +3.1% |
| 2024-04 | 4,080,000 | +4.3% |
| 2023-10 | 3,910,000 | +0.0% |
| 2023-04 | 4,190,000 | +7.2% |
What typically happened after similar EHS levels:
| Metric | 3M | 6M | 12M |
|---|---|---|---|
| EHS Change | +0.9% (62%+) | +2.8% (57%+) | +2.5% (67%+) |
| XHB Return | +11.4% (75%+) | +11.3% (86%+) | +35.0% (67%+) |
Median return shown, with percentage of periods positive in parentheses.
Current existing home sales are at the 0th percentile of the recent historical range, matching the lows seen in late 2023. Historically, when sales volume hits these depressed levels, the forward 12-month return for the XHB homebuilder ETF has a median gain of 35.0%. This suggests that low transaction volume in the existing market often serves as a catalyst for new home demand. Positive returns for homebuilders have occurred 67% of the time following similar sales troughs.
| Stock | Price | 1M | vs SPY | YTD |
|---|---|---|---|---|
| TOL Toll Brothers | $161.45 | +9.9% | +10.4% | +19.4% |
| NVR NVR Inc | $8097.25 | +6.7% | +7.2% | +11.0% |
| XHB SPDR S&P Homebuilders ETF | $120.60 | +6.1% | +6.6% | +17.1% |
| PHM PulteGroup | $139.32 | +4.6% | +5.1% | +18.8% |
| ITB iShares U.S. Home Construction | $112.80 | +4.6% | +5.1% | +17.1% |
| KBH KB Home | $63.92 | +3.6% | +4.1% | +13.3% |
| DHI D.R. Horton | $163.85 | +2.6% | +3.1% | +13.8% |
| LEN Lennar | $120.99 | +0.1% | +0.6% | +17.7% |
Homebuilder equities are significantly outperforming the broader S&P 500, with the XHB ETF up 17.1% year-to-date. Toll Brothers (TOL) leads the pack with a 19.4% YTD gain, followed closely by PulteGroup (PHM) at 18.8%. Even with the sales slump, D.R. Horton (DHI) and Lennar (LEN) have posted double-digit gains of 13.8% and 17.7% respectively. This outperformance reflects investor confidence in the builders' ability to capture market share from the frozen existing home market.
| Stock | Price | 1M | vs SPY | YTD |
|---|---|---|---|---|
| HD Home Depot | $390.68 | +4.2% | +4.7% | +13.5% |
| LOW Lowe's | $287.04 | +6.0% | +6.5% | +19.0% |
Home improvement retailers are also seeing strong momentum, with Lowe's (LOW) surging 19.0% YTD and Home Depot (HD) rising 13.5%. This strength suggests that homeowners who are locked in by low mortgage rates are choosing to renovate their current properties instead of moving. The 6.0% monthly gain for LOW indicates robust consumer spending on residential maintenance and upgrades.
The housing sector's resilience is a major tailwind for consumer discretionary and industrial sectors, even as the S&P 500 remains relatively flat at +1.4% YTD. The decoupling of homebuilder stocks from actual sales volume suggests that equity markets are pricing in a long-term structural shortage of housing. Investors are favoring companies with strong balance sheets and the ability to offer mortgage rate buy-downs. Consequently, housing-sensitive equities are currently acting as a high-beta play on economic stability.
Investors should maintain an overweight position in homebuilders (ITB, XHB) to capitalize on the structural deficit in housing supply. The historical data suggests that buying at volume troughs like the current 3.91M level yields significant 12-month returns. Additionally, exposure to home improvement (LOW, HD) provides a hedge against the low-turnover environment as renovation activity persists. We recommend focusing on builders like TOL and PHM which have shown the strongest price momentum in the current high-rate environment.