Housing Demand Is Surging — So Why Are Sales Falling?
Something strange is happening in the U.S. housing market.
Mortgage applications are rising.
Pending home sales are falling.
Those two things should not coexist in a healthy market — yet here we are.
This disconnect is one of the clearest signals that housing is breaking in a way we haven’t seen in decades. Not because people don’t want homes — but because the math no longer works.
Let’s walk through what’s happening, why it matters, and what comes next.
1. Buyers Are Showing Up… Then Walking Away
Mortgage purchase applications — a leading indicator of buyer intent — have been trending higher over the past year. This data comes from ResiClub and shows more people reaching out to lenders, pulling credit, and running numbers.
That part looks like “demand.”
But here’s the problem:
Those applications are not turning into closed sales.
Many buyers are either:
Getting denied due to job loss or tighter credit
Or seeing the monthly payment and saying, “This makes no sense”
Or the house just needs way more work than they were expecting
So they do the rational thing: they go back to renting.
This shows up clearly in the next data point.
2. Pending Home Sales Just Hit an All-Time Low
December 2025 recorded the lowest level of pending home sales ever, dating back to 2001.
That means fewer contracts are being signed than at any point in modern housing history — including the Global Financial Crisis.
When the Fed raised rates in March 2022, contract activity fell off a cliff. And even with mortgage rates falling from ~8% toward ~6%, buyers haven’t returned in meaningful numbers.
Why?
Because affordability is still broken.
Pending sales today are telling us exactly what closed sales will look like 30–60 days from now — and that implies a very weak start to 2026.
3. This Isn’t Just a Sun Belt Story Anymore
Month over month, pending sales are down 9.3% nationally.
Yes, the Sun Belt was hit first — Florida, Texas, Nevada, Colorado — but the slowdown is now spreading:
Midwest
Northeast
West Coast
Builders in the South have already been slashing prices and offering aggressive incentives just to move inventory. Other regions are now starting to follow the same path.
Real estate is illiquid. Prices don’t adjust instantly.
They adjust slowly, then suddenly.
4. Buying vs Renting Has Never Been This Misaligned
Here’s one of the most important charts in housing right now:
The monthly cost to own a home is $800–$900 more than renting the same property.
That’s the widest numerical gap in over 50 years.
Why would a rational buyer:
Take on higher monthly costs
Absorb maintenance, insurance, taxes, and HOA fees
Lock themselves into peak pricing
…when they can rent cheaper and wait?
That’s exactly what buyers are doing.
5. History Is Rhyming — And It’s Not Subtle
This situation isn’t unprecedented.
In 1981, during another period of extreme affordability stress, the New York Times wrote:
“The only real way to freshen the stagnant housing market is to lower prices.”
Builders back then tried the same tricks we see today — rate buydowns, incentives, financial engineering — to avoid cutting prices outright.
Eventually, it didn’t work.
When wishful thinking about lower rates fades, prices follow.
6. First-Time Buyers Are Disappearing
This is the most alarming trend of all.
The share of first-time buyers has fallen from ~50% in 2010 to ~20% today
The percentage of 30-year-olds who are married homeowners has collapsed from over 50% to ~12%
Median age of today’s home buyer is 59 years old (up from 31 in 1981)
Housing is no longer being supported by organic, generational demand.
It’s being propped up by:
Equity-rich older buyers
Cash purchasers (~28% of sales)
Intergenerational wealth transfers
That is not a healthy foundation.
7. Debt Is the Silent Killer
Younger buyers are also facing:
Rising student loan delinquencies
Rising credit card delinquencies
Rising auto loan delinquencies
Many are relying on family gifts just to get in — often buying at peak prices with minimal equity cushion.
That’s risky in a market where prices are already rolling over.
8. Prices Are Already Falling — Quietly
More than 53% of U.S. metros are now seeing price declines.
This isn’t just Florida or Texas anymore. It’s spreading.
Based on the numbers I’m running, a 31–40% price correction in overbuilt Sun Belt markets is plausible over the next 5-7 years from the peak in 2022.
That would be painful — especially for buyers from the 2022–2025 vintage — but it would also restore affordability for the next generation.
And that matters more than protecting paper gains.
Final Thought
This isn’t 2008.
There’s no forced liquidation wave yet.
This is a buyer strike, driven by affordability, demographics, and math.
When buyers opt out, prices eventually follow.
Magnitude, direction, and timing will vary by market — but the direction is becoming harder to ignore.
I’d love to hear what you’re seeing locally.
Is buying cheaper than renting where you live?
Are buyers pulling back?
History doesn’t repeat — but it rhymes. And this rhyme is getting louder.
jon@movewithmomentum.com
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