A stronger-than-expected jobs report and easing inflation are offering cautious encouragement for the U.S. housing market after a slow start to 2026. While existing-home sales fell to a 16-month low in January, economists say broader economic signals suggest conditions may gradually improve in the months ahead.
The market has been weighed down by elevated home prices and mortgage rates that remain well above pandemic-era lows. Yet recent macroeconomic data point to a more supportive backdrop, even as affordability challenges persist.
The U.S. housing market entered the year on weak footing, with existing-home sales dropping in January to their lowest level in 16 months, High prices and economic uncertainty have kept many prospective buyers on the sidelines, prolonging a stalemate between buyers and sellers.
Home values surged during the pandemic, fueled by historically low borrowing costs and limited inventory. Since then, mortgage rates have climbed sharply, damping demand. Although the number of sellers has outpaced buyers over the past year, creating more room for negotiation, prices have continued to rise nationally. As a result, both buyers and sellers remain locked in what analysts describe as a prolonged freeze.
Jobs and Inflation Data Point To Improving Conditions
Recent economic indicators have provided grounds for measured optimism. Danielle Hale, chief economist at Realtor.com, highlighted last week’s labor market and inflation data as constructive signals for housing, according to Newsweek.
The January jobs report showed the U.S. economy added 130,000 jobs, a figure Hale described as “nearly nine times as many as the typical month in 2025.” She characterized the report as one of the week’s relatively positive developments.
Inflation data also moved in a favorable direction. Overall inflation registered 2.4 percent in January, while core inflation, which excludes food and energy, came in at 2.5 percent. Hale noted that core inflation is at its lowest level since March 2021, though it remains above the Federal Reserve’s target.
Taken together, the jobs and inflation figures were not enough to shift expectations that the Federal Reserve will leave its policy rate unchanged in March. Even so, Hale said it was encouraging to see both indicators moving in the desired direction.
Jake Krimmel, senior economist at Realtor.com, echoed that assessment. According to a statement shared with Newsweek, easing inflation combined with rising wages could strengthen real income growth and purchasing power. With mortgage rates hovering around 6.1 percent for several weeks, he said, the trend is moving in the right direction for improving affordability heading into spring.
Mortgage Rates and Federal Reserve Policy Remain Central
Mortgage rates remain a central factor in the housing outlook. As of February 12, the average 30-year fixed-rate mortgage stood at 6.09 percent, according to Freddie Mac. Although that is roughly double the lows seen during the pandemic, it marks the lowest level in about three years and has remained relatively steady.
Hale described steady mortgage rates as offering “some reasons for optimism” that the housing market could move past its winter slowdown. Stability in borrowing costs may help reduce uncertainty for buyers who have been reluctant to reenter the market.
Federal Reserve policy will continue to shape expectations. Chris Zaccarelli, chief investment officer at Northlight Asset Management, said that as long as inflation remains contained, attention will shift back to the labor market. According to his statement shared with Newsweek, under current conditions the Fed is likely to proceed cautiously and lower rates a couple of times later this year. For now, most experts expect only modest improvements in housing affordability in 2026. The latest data suggest movement in a more favorable direction, even if the market remains constrained by high prices and cautious consumers.
