Wall Street spent much of early 2026 warning that homebuyers would stay frozen on the sidelines until mortgage rates fell into the mid-5% range, with Morgan Stanley strategists projecting the 30-year fixed rate would dip to 5.50%–5.75% by mid-2026.
That narrative took a hit the week of May 17 when federal data showed buyers stepping back into the market for the third consecutive month, signing purchase contracts at a pace that outpaced economists’ projections.
The numbers landed in a spring buying season many analysts had already written off, citing the war in Iran, sticky inflation, and borrowing costs well above 6%, and in a broader economy where consumer confidence sits near historic lows even as the stock market trades at record highs.
For anyone deciding whether to buy, sell, or stay put, the gap between sentiment and action is telling.
Pending home sales beat forecasts for a third straight month in April
Signed purchase contracts for existing homes rose 1.4% from March to April, pushing the pending home sales index to 74.8, its highest reading since November, the National Association of Realtors reported. The gain exceeded the 1.0% rise economists had predicted, and year-over-year contracts climbed 3.2% compared to April 2025.
Regional performance split sharply, with the Northeast posting a 6.6% monthly jump, the highest among the four tracked regions. The Midwest followed with a 3.0% gain, and the West edged up 0.4%, while the South was the only region to decline at 0.7%, the NAR data showed.
Buyers are coming out with cautious optimism despite increasing economic uncertainty and a slight rise in mortgage rates
Homebuilder confidence stays below the break-even line for 25 straight months
While buyers showed resilience, the supply side told a more cautious story in a separate report released one day before the pending sales data.
The NAHB/Wells Fargo Housing Market Index rose three points to 37 in May, recovering from a seven-month low but remaining below the 50-point dividing line for the 25th consecutive month, the National Association of Home Builders confirmed.
“The housing market remains soft as higher mortgage rates, rising gas prices, and economic uncertainty related to the war in Iran continue to dampen buyer demand,” said NAHB Chairman Bill Owens, a home builder and remodeler from Worthington, Ohio.
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All three builder index components improved by three points in May, with current sales conditions at 40, prospective buyer traffic at 25, and the six-month outlook at 45, though each stayed below the neutral 50 mark, the NAHB reported.
A buyer financing $300,000 at the current 6.545% average rate on a 30-year fixed mortgage will pay roughly $385,834 in total interest over the life of the loan, a figure that would drop by tens of thousands of dollars if rates fell back to the low-6% range seen earlier this year, Fortune reported based on Optimal Blue data for loans locked in as of May 20, 2026.
Homebuilder confidence improved slightly in May, but high mortgage rates, fuel costs, and economic uncertainty continue to weaken housing demand nationwide.
Fewer sellers are slashing prices as buyer demand firms up
The uptick in signed contracts appears to be shifting leverage back toward sellers, according to a separate analysis published during the same week. About 35.4% of home sellers reduced their asking price in April, down from 35.6% in March and well below the record high of 36.6% set last August, Redfin reported.
Existing-home sales in April reached an annualized rate of 4.02 million units with a median sale price of $417,700, and total housing inventory rose 5.8% from March to 1.47 million units, representing a 4.4-month supply, NAR’s separate existing-home sales report showed.
“Historically low foreclosure sales imply minimal price discounts, with a majority of markets selling at a higher price from a year ago,” Yun said in the pending sales release. “Unless supply meaningfully increases, home price growth could outpace wage growth and further erode the homeownership rate.”
Nick Gerli, founder of real estate analytics platform Reventure App, wrote on X that “initial rebound markets in 2026 and 2027 will be Midwest-centric with higher affordability, alongside a handful of South/West markets where prices have dropped,” according to Newsweek.
What the spring buying season signals for the rest of 2026
Pending home sales function as a leading indicator because they measure contracts signed before deals close, typically 30 to 45 days later. Three straight months of rising contract activity suggest that closed existing-home sales could improve through late spring and into summer, even if mortgage rates remain elevated.
Fannie Mae’s May Housing Forecast projects the 30-year fixed rate will average 6.3% for the remainder of 2026, whilethe Mortgage Bankers Association projects it will remain at 6.0% to 6.2%, leaving little room for a dramatic drop that would unlock a wave of fresh demand.
“Recent increases for long-term interest rates will continue to hold back home buyer demand,” said Robert Dietz, NAHB’s chief economist. “Although some regional markets, including parts of the Midwest, are showing relative strength, the housing market continues to face significant affordability challenges.”
Properties spent a median of 32 days on the market in April, up from 29 days a year earlier, while first-time buyers represented 33% of completed sales, according to NAR’s existing-home sales data. Together, the figures suggest a market moving more deliberately but still moving forward.
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