Pending Home Sales Drop Sharply in December

The U.S. housing market ended 2025 with a significant setback, as pending home sales experienced a sharp decline in December. This downturn marks a critical turning point, casting a shadow over the economic forecast for the coming year.

With buyer activity cooling and inventory shrinking, the final month of the year provided a clear signal that the market is entering a period of contraction. The data points to a challenging environment for both real estate professionals and prospective homeowners as the calendar turns to 2026.

The final month of 2025 revealed a notable slowdown in real estate transactions. Pending home sales, a forward-looking indicator of market health, fell sharply, indicating fewer contracts were signed for future closings.

This decline was accompanied by a parallel drop in the number of properties available to buyers. The market saw a 9% decrease in active listings from November to December, a contraction that underscores the growing pressure on the housing supply.

The combination of falling sales and shrinking inventory creates a complex landscape for the market. Fewer homes on the market typically drive competition, yet the simultaneous drop in pending sales suggests buyer demand is also weakening under current economic conditions.

Perhaps the most telling statistic from the December report is the state of housing inventory. There were just 1.18 million homes on the market at the end of the year.

This figure represents a double-digit percentage drop from the previous month and matches the lowest inventory level recorded throughout all of 2025. The scarcity of available homes presents a significant hurdle for buyers searching for options.

The inventory crunch has several implications for the market:

• Reduced choice for homebuyers
• Increased competition for listed properties
• Potential upward pressure on prices despite lower sales volume
• Longer search times for prospective buyers

With supply at a yearly nadir, the market dynamics are shifting toward a more constrained environment, setting the stage for a difficult 2026.

The December data has significant implications for the 2026 housing outlook. The sharp drop in pending sales serves as a leading indicator, suggesting that closed transactions in the first quarter of the new year will likely reflect this decline.

Economists and market analysts view this contraction as a key factor that will dampen the broader real estate forecast. A market characterized by low inventory and falling pending sales is one that faces headwinds in generating momentum.

The trend observed in December is not an isolated event but rather the culmination of market pressures that have been building. As the market transitions into 2026, stakeholders are closely watching to see if this decline represents a temporary dip or the beginning of a sustained period of adjustment.

The December figures highlight a market at a crossroads. The dual pressures of declining sales and limited supply create a challenging environment for all participants.

For sellers, the shrinking inventory could offer some leverage, but the drop in pending sales indicates that buyer confidence may be wavering. For buyers, the search for a home becomes more difficult with fewer options available, yet the cooling demand may eventually ease price pressures.

The data suggests that the housing market is entering a phase of recalibration. After a period of intense activity, the market is now adjusting to higher interest rates and economic uncertainty, leading to the slowdown observed in the year's final month.

The sharp decline in pending home sales and the record-low inventory levels in December have set a cautious tone for the 2026 housing market. The data indicates that the market is not immune to broader economic pressures and is responding with a clear contraction.

As the new year begins, the focus will be on whether these trends continue or if the market finds a new equilibrium. The path forward will depend on a variety of factors, including interest rates, economic stability, and buyer sentiment.

For now, the message from the December data is clear: the housing market is facing significant challenges, and the outlook for 2026 is one of caution and adjustment.