Housing Market Recovery on Road Back to Normal
After years of stagnation in the housing market, modest improvements in affordability and lower mortgage rates are starting to bring buyers back. Historically, existing-home sales averaged around 4.1% of total U.S. households—roughly 5.4 million annualized sales today—but current activity remains about 35% below that norm. The recent uptick in mortgage applications, up nearly 8% month-over-month and 19% year-over-year, suggests more buyers are reentering the market as affordability improves. In September, house-buying power reached its highest level since early 2022, supported by lower rates, rising incomes and slower home price growth.
However, affordability remains well below pre-pandemic levels, and psychological barriers on the seller side continue to limit supply. Many homeowners are reluctant to list, holding out for higher prices or constrained by low mortgage rates locked in during the pandemic. While life events, like marriage, family growth and job changes, are sustaining some sales, broader recovery will be gradual. According to First American’s September 2025 Outlook, existing-home sales are projected to rise 0.6% from August and 3.2% from a year ago, driven by a resilient economy, improved affordability and slightly weaker rate lock-in effects. The path to normalcy is forming, but meaningful recovery will take time.
