Falling values and softer competition offered buyers a tentative edge in January
After three bruising years for borrowers, Zillow’s January Market Report suggests that affordability finally edged in buyers’ favor, even as overall activity stayed muted.
National home values slipped for the sixth straight month, while the typical monthly mortgage payment on a US home was 8.4% lower than a year earlier, driven by easing mortgage rates.
The typical US home was valued at $358,968 in January, with the Zillow Home Value Index down 0.4% from December and up just 0.2% year over year.
Active inventory was 6% higher than a year earlier, with 1.11 million homes for sale, and homes took a median 47 days to go pending – eight days longer than a year before – as 22% of listings saw a price cut.
New breathing room for buyers
Zillow’s chief economist Mischa Fisher framed January as an early step away from the extreme squeeze that defined the past several years.
“We're starting 2026 following three years that saw transactions bouncing along the bottom and affordability as a chronic struggle,” Fisher said.
“Our forecast for both sales and affordability this year is one of gradual improvement. January was a cautious first step along that path, as potential buyers and sellers dealt with severe winter weather in many major markets. We expect sales to pick up as spring approaches. Housing affordability continues to improve for prospective homebuyers, while modest growth in the Zillow Observed Rent Index points to continued cooling in shelter inflation.”
There were 219,644 homes sold in January, based on preliminary count, about 4% fewer than a year earlier and sharply below December.
Major metros told a story of divergence: New York’s typical home value stood at about $707,500, up nearly 4% year over year, while Los Angeles hovered around $946,000, roughly flat.
Sun Belt markets such as Miami and Austin saw more visible resets, with Miami values down about 4% annually to roughly $468,000 and Austin off nearly 6% to about $418,000.
Similarly, ICE Mortgage Technology reported in late 2025 that US mortgage affordability reached its best level in roughly two and a half years, as 30‑year rates hovered near the mid‑6% range.
“We’re seeing affordability at a 2.5‑year high, which is beginning to bolster purchase demand,” Andy Walden, head of mortgage and housing market research at ICE, said.
Cautious optimism on rates and volume
Even so, industry forecasts continue to point to a slow grind rather than a snap‑back. The Mortgage Bankers Association expects 30‑year mortgage rates to hold in a 6–6.5% band for several years, with chief economist Mike Fratantoni saying “our forecast is for mortgage rates to stay within a fairly narrow range over the next few years,” and that most economists do not expect a return to sub‑6% borrowing costs.
In early January, Redfin data showed payments at a two‑year low but demand “in its holiday hangover season,” as head of economic research Chen Zhao put it, with pending sales and new listings still down year over year.
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