If the sluggish end to 2025 had you worried about the economy, the latest data should offer some peace of mind. As we head toward the spring homebuying season, the U.S. economy and housing market are stepping into 2026 on much firmer footing than many expected.
From rebounding consumer confidence to a surge in mortgage applications, the market is showing signs of a steady thaw. While affordability remains a hurdle, the balance of indicators points to gradual improvement rather than a renewed downturn. Here is what you need to know.
1. Confidence is Rebounding (But Watch for Inflation)
Both everyday consumers and corporate leaders are feeling noticeably better about the year ahead.
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Consumers: The Consumer Confidence Index edged up in February. People are less anxious about the job market and are feeling more optimistic about their future income.
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CEOs: Corporate optimism jumped significantly in Q1 2026. However, there is a catch for consumers: 71% of CEOs report facing higher costs due to recent tariffs, and nearly half plan to pass those costs onto customers. This means we could see isolated price bumps for certain goods and services in the near future.
2. Builders Are Busy & Supply is Shrinking
The new construction sector is starting to catch its stride again. After a dip in the fall, residential construction spending bounced back at the very end of 2025, driven heavily by single-family home builds.
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Sales Are Up: New home sales closed out 2025 strong, jumping nearly 4% year-over-year in December. The Midwest led the charge with a massive 30% annual increase in new home sales.
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Inventory is Down: Because buyers snapped up these new builds, the supply of new homes dropped to 7.6 months in December—the lowest level we've seen since July 2023.
3. Mortgage Applications Surge as Rates Hit Multi-Year Lows
The most encouraging sign for the spring housing market is happening at the loan desk. With interest rates sliding to their lowest levels since 2022, buyers and current homeowners are taking action.
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Purchase Demand: While weekly numbers fluctuate, unadjusted mortgage applications for home purchases are up 12% compared to this time last year.
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Refinance Boom: Homeowners who bought during the peak-rate months are seizing the moment; refinance applications have surged a staggering 150% year-over-year.
The Bottom Line
The housing market is slowly but surely waking up. Lower rates and builder incentives are successfully drawing buyers off the sidelines. If you have been waiting for the "right time" to enter the market, this spring is shaping up to be much more active and favorable than the last two years.
Would you like more insights on how this trend could impact your real estate decisions? Give us a call or if you'd like to schedule a meeting, email us at [email protected]
