Housing Market Analysis: Buyers Gain Ground as Seller Surplus Reaches 13-Year High

The U.S. housing market has undergone a fundamental restructuring, with the 47.1% seller surplus representing the most pronounced buyer-seller imbalance in over a decade [1]. This gap, calculated as the percentage by which sellers outnumber buyers, has widened 22.2% year-over-year and 7.1% month-over-month—the largest monthly rise since September 2022 [1]. The asymmetry between buyer and seller activity is particularly telling: while homebuyer activity fell 5.9% month-over-month to 1.34 million (the largest drop since March 2023), seller activity declined only 1.1% to 1.97 million [1]. This divergent response indicates persistent seller motivation despite softening demand, creating excess inventory that benefits qualified buyers.

The geographic distribution of this imbalance reveals significant regional variation. Sun Belt markets experience the most pronounced buyer surplus, with Austin, Texas leading at 128% more sellers than buyers, followed by Fort Lauderdale, Florida at 125%, Nashville, Tennessee at 111%, Miami, Florida at 103%, and San Antonio, Texas at 103% [1]. These markets, which experienced rapid price appreciation during the pandemic era, now face substantial inventory buildup as remote work flexibility diminishes and migration patterns normalize. Conversely, Midwest and select Northeast markets offer relatively better conditions for sellers, reflecting the continued urban-rural dynamic in American housing preferences.

Despite the favorable buyer conditions, the affordability crisis remains the binding constraint on market activity. The National Association of Realtors characterized 2025 as “another tough year for homebuyers, marked by record-high home prices and historically low home sales” [3]. The median existing home price reached $405,400 in December 2025, representing a 0.4% year-over-year increase, while the full-year median price stood at $414,400—up 1.7% from 2024 [1][3]. While this rate of appreciation represents a moderation from the double-digit increases seen in 2021-2022, prices remain above $400,000 nationally, effectively pricing out many potential first-time buyers.

High borrowing costs, labor market uncertainty, and elevated home prices continue to sideline potential purchasers. Even with the substantial buyer surplus, price growth has only moderated rather than reversed, underscoring the structural nature of the affordability challenge [1][3]. The tension between increased buyer leverage and persistent price constraints creates a complex environment where qualified buyers with access to financing benefit significantly, while broader market participation remains constrained.

Mortgage rates have declined to approximately 5.99%, matching levels from February 2023 and representing near three-year lows [4][5]. This decline followed policy actions aimed at housing market support, with projections suggesting rates will stabilize around 6% through much of 2026 [4][6]. For a median-priced home (approximately $425,000), each percentage point reduction in rates translates to roughly $118 in monthly savings, providing meaningful relief for mortgage holders and improving the calculus for potential purchasers [5].

The rate environment has contributed to improved market sentiment, as evidenced by December 2025’s 5.1% month-over-month increase in existing home sales to 4.35 million—the largest monthly gain since February 2024 and a three-year high for the metric [3][7]. However, this year-end recovery could not offset a historically weak year; 2025 marked the third consecutive year of declining annual sales, with full-year transactions matching 2024’s 30-year low of 4.06 million [3][7]. The disconnect between month-to-month improvements and annual performance highlights the depth of structural challenges facing the market.

The 2025 housing market delivered mixed signals that require careful interpretation. While the year closed with encouraging momentum in December, the annual figures reveal a market at historic weakness levels. Total existing home sales of 4.06 million represent the lowest annual figure in three decades, reflecting the cumulative impact of affordability constraints, interest rate volatility, and inventory limitations that have persisted through the post-pandemic adjustment period [3][7]. The flat performance relative to 2024—despite substantially lower mortgage rates by year-end—suggests that rate relief alone cannot restore historical transaction volumes without corresponding income growth and price normalization.

The December surge, while encouraging, must be contextualized within this broader trend. The 4.35 million sales rate (seasonally adjusted annual rate) represents a meaningful recovery from suppressed levels but remains below pre-pandemic norms of approximately 5.5-6 million annual transactions [7]. The durability of this recovery will depend on whether rate declines translate into sustained buyer engagement or merely pull forward future demand.

The 47.1% seller surplus reflects deeper structural forces beyond simple supply-demand dynamics. The pandemic-era housing boom created incentives for substantial listing activity as homeowners sought to capitalize on elevated prices, while simultaneously reducing move-up activity due to locked-in low mortgage rates from 2020-2022. As rates rose and then stabilized, this pent-up supply has gradually entered the market, while demand has been constrained by affordability and economic uncertainty. The 13-year high in buyer-seller imbalance thus represents the normalization of pandemic distortions rather than a sudden market collapse.

The concentration of buyer surplus in Sun Belt markets—particularly Florida, Texas, and Tennessee metropolitan areas—signals a potential long-term reorientation of housing market dynamics [1]. These markets experienced disproportionate pandemic-driven migration, driving both price appreciation and construction activity. As remote worknormalizes and population shifts stabilize, these markets face excess inventory built on assumptions of continued growth. This regional variation suggests a “correction, not crash” narrative, with overextended markets adjusting while more stable regions maintain greater equilibrium.

The shifted market dynamics require adaptation from key industry participants. Lenders face a complex environment where purchase mortgage volume potential increases with rate relief, but refinancing activity continues to decline. Builders have responded to demand signals with cautious production, balancing strong demographic tailwinds from millennial household formation against near-term affordability headwinds. HomeServices of America describes the market as “on a path to stability” with price appreciation aligning with historical averages of 2.5-3.5% [9], suggesting industry acceptance of normalization rather than continued expansion.

: Despite improved buyer conditions, the median home price above $400,000 combined with elevated rates creates a structural barrier for first-time buyers and middle-income households. This limitation constrains the depth of any market recovery and maintains risk of prolonged transaction weakness.

: Sun Belt markets with the strongest buyer surplus may face continued price pressure as sellers adjust expectations. Austin, Miami, and Nashville, which experienced substantial pandemic appreciation, could see more pronounced corrections if inventory accumulation continues [1].

: Labor market conditions and broader economic sentiment significantly influence housing purchase decisions. Any deterioration in economic indicators could further suppress buyer activity despite favorable market conditions.

: While rates have declined, policy uncertainty and economic fluctuations could introduce rate volatility, affecting buyer confidence and purchasing decisions.

: Qualified buyers with access to financing can leverage the seller surplus to negotiate price concessions, request seller concessions for closing costs, and avoid bidding wars that characterized the 2021-2022 market [1][2].

: The 47.1% seller surplus means significantly reduced competition for available listings, allowing buyers more time for property evaluation and decision-making without the pressure of rapid sale acceptance.

: With rates near 6% and projected to stabilize, buyers gain greater certainty in mortgage cost calculations, supporting longer-term housing affordability planning [6][8].

: Forecasters project that incomes will outpace inflation in 2026, gradually improving the housing affordability ratio without requiring price declines [8].

The U.S. housing market has shifted decisively toward buyer advantage, with the 47.1% seller surplus representing the most pronounced imbalance since 2013 [1]. This structural change provides genuine opportunities for purchasers, including reduced competition, increased negotiating leverage, and moderating price growth, while persistent affordability constraints continue to limit broader market participation.

Market indicators for December 2025 show encouraging momentum, with existing home sales reaching 4.35 million (a three-year high) and mortgage rates near 6% [3][4][7]. However, annual 2025 sales of 4.06 million represent a 30-year low, underscoring that structural challenges require more than inventory relief to resolve [3]. Industry forecasters anticipate gradual stabilization in 2026, with projected home value appreciation of 1.7% and existing home sales reaching 4.3 million (+4.3%), while the mortgage payment-to-income ratio may fall below the 30% affordability threshold for the first time since 2022 [8].

The consensus view suggests 2026 will bring “steadier footing” as years of limited inventory give way to gradual supply increases and income growth outpaces inflation [8]. Realtor.com classifies markets with over 10% more sellers than buyers as buyer’s markets, and the current 47.1% surplus positions the market firmly in this territory through at least 2026 [1][2].