For three years, the U.S. housing market hasn’t been in decline, it’s been at a standstill. High mortgage rates and historically low inventory pushed prospective buyers to the sidelines, waiting, sometimes month after month, for conditions to change, while many existing homeowners stayed put, locked into far lower rates.
As the spring homebuying season begins, the key question is no longer why the market stalled, but whether it can start moving again.
There are early signs it might. Mortgage rates have ticked down modestly from their peak, and affordability has improved for eight consecutive months, supported by income growth outpacing home price gains.
What’s changing now isn’t demand, it’s that buyers and sellers may finally be able to meet in the middle.
Where the Market is Starting to Move
One of the clearest signs of change is the return of first-time buyers. For much of the past few years, they were effectively sidelined, priced out by rising rates, limited inventory, and competition from all-cash buyers and investors. Now, they are beginning to re-enter the market, making up 34% of purchases in February, surpassing last year’s annual share.
As they return, the dynamics of buying are also shifting. Homes are staying on the market longer, and bidding wars have eased, with just 14% of homes selling above asking price. The idea of negotiating a contract, unheard of for years, has started to reappear.
First-time buyers also tend to set the broader market in motion. Their purchases free up rental supply and enable move-up buyers, creating a ripple effect and generating roughly $125,300 in local economic activity per home sale.
Taken together, these are early signs of a market that is starting to find its footing again.
Supply is the Core Constraint
The biggest constraint remains housing supply, especially at the lower end of the market. Affordable, entry-level homes are still limited, making it difficult for many buyers to break in.
At the same time, the lock-in effect continues to restrict inventory. Homeowners with mortgage rates below 4% are reluctant to move into a higher-rate environment, even when life changes might otherwise prompt a move.
But there is a glimmer of hope. The share of homeowners with mortgage rates below 3% is now on par with those holding rates above 6% — a shift that could gradually reduce the intensity of the lock-in effect over time.
Even so, supply constraints are unlikely to resolve quickly. The U.S. housing shortage, which NAR estimates at roughly 4.7 million homes, is the result of years of underbuilding, compounded by zoning restrictions, land constraints, labor shortages, and regulatory hurdles that continue to stall new supply.
These constraints will continue to weigh on the market.
What This Spring Could Tell Us
While the market is showing early signs of movement, the pace of activity will depend largely on mortgage rates.
Earlier this year, rates were trending closer to 6%, raising expectations for a stronger spring. But recent volatility, driven in part by broader macroeconomic uncertainty, has pushed rates higher.
If rates move back toward 6%, activity could pick up meaningfully. A drop from 7% to 6% can mean roughly $2,000 in annual savings for buyers, based on NAR analysis. If they continue to rise, many buyers could once again be priced out, and the market could slip back into a holding pattern.
Even small changes in rates can have outsized effects on affordability and demand, making the coming months especially important.
What Comes Next
The housing market is not entering a boom, but it may be entering a phase of more steady, functional activity.
After years of limited movement, even incremental change matters. A modest increase in inventory, improving affordability, and the return of first-time buyers can begin to unlock activity across the market.
That progress, however, will depend on whether buyers can act. For many millennials, who make up a large share of first-time buyers, economic and geopolitical uncertainty has been a near-constant backdrop. But life milestones still tend to outweigh headlines. The challenge is that rate volatility tied to global events can quickly change what they can afford in real time.
Even if conditions improve, progress will be uneven. Some regions, particularly in the South where job growth and population inflows remain strong, are already seeing more momentum. Others, including parts of the Northeast, continue to face persistent supply constraints.
If rates stabilize and inventory continues to edge upward, 2026 could mark the beginning of a more balanced housing landscape — and for the millions of sidelined buyers who have been patiently waiting, that alone may be enough to draw them back in.
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.
