This year hasn’t been so bad.
Home sales were on par with 2024. Home prices remained steady, and inventory soared, giving homebuyers more choice than they’ve had in years. The fall market was robust, with October and November activity being at its strongest since 2022. The economy, at times precarious, has avoided a recession, with some analysts even predicting gross domestic product (GDP) will tick up to 3 percent next year.
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So, why does everyone feel so terribly about the year that was?
Jeff Tucker
Windermere Principal Economist Jeff Tucker said the economy and housing market are driven by feelings as much as by statistical data, with consumers rightfully “bummed out” by affordability woes.
“Kyla Scanlon coined the term ‘vibecession’ to talk about how the vibes felt as bad as a recession, even though we weren’t statistically there,” he told Inman. “High interest rates play a significant role in bumming people out about the state of the economy and the housing market.”
“That picture of the American Dream for millennials, Gen Z, and anyone else hoping to buy a home in 2023, 2024, or 2025 has been hard to come by,” he added.
Tucker said 5 percent mortgage rates and increased inventory will go a long way toward improving sentiment in 2026, but even if the best-case scenario doesn’t play out, there’s still plenty of room for opportunity.
“I think for agents, some of the big opportunities actually shine through when you look a little more closely at the demographics of who is transacting and where they’re coming from,” he said. “You can look at today’s price landscape and feel very daunted by all the obstacles to getting into homeownership for first-time home buyers. But in many cases, older homeowners, I think, provide some of the biggest opportunities for business right now.”
“They’re very well capitalized, and many of them own their [homes] free and clear,” he added. “Those homes have really substantially increased in value over the last several years, which actually gives older and retired homeowners a lot more options than they may even realize.”
Inman: So, I’m going to start our conversation with the same question I’ve been asking everyone else: What trend or moment has defined 2025 for you?
Tucker: I almost wonder if this is an acceptable answer, but I’d say what really stood out to me about 2025 was the remarkable stability of the housing market. We did not see the bounce back in existing home sales that I had been expecting to finally kick into gear after the market had been frozen.
I’m sure you’ve gotten sick of hearing that metaphor, but the market went into a deep freeze in late 2022 and certainly in 2023, and coming into 2025, I was expecting home sales to take off. It just didn’t happen this year. We don’t yet have all the numbers, but if you look at year-to-date existing home sales through October, they’re just pretty much flat.
There are two ways to read what you just said. We can celebrate that 2025 wasn’t worse than 2024, which was seen as rock bottom for the market. On the other hand, we can freak out because we haven’t gotten any better than rock bottom. You’re taking the first perspective, but I’m sure many people would group themselves under the second option.
Yeah, you’re totally right. Is the glass half full? Or is the glass half empty? It’s relative to your expectations.
I think certainly from a sales volume perspective, 2025 was a disappointment. It was definitely a glass half empty. It’s been a bit of a lift from the rock-bottom sales volumes of 2024, but many real estate agents expected much more.
The glass-half-full case would be that mortgage affordability improved. It was out of reach for a lot of people, due to price appreciation and mortgage rate increases that started in 2022 and hovered since then. But the stability of prices this year created a little breathing room, a little time for incomes to catch up a bit, and now that mortgage rates have made some good progress downward — they’ve spent a few months now closer to six and a quarter — and that combination has improved the affordability picture.
And I think that’s the best way to improve affordability. The other way, which I don’t think anyone wants to see, would be substantially falling home prices. There are a couple of regions of the country, especially ones that kind of overheated in the pandemic, like Texas and Florida, where prices did fall. But outside of that, prices have been stable, and that’s one way the market is healing or returning to normalcy, gradually.
Staying with affordability, do you think the market favors buyers or sellers more? I think that’s been the primary question this fall, and the answer for a variety of reasons hasn’t been clear. So, is it a buyer’s market? A seller’s market? Or somewhere in between?
I would lean toward a buyer’s market, but it’s right on the borderline. It’s not an extreme buyers’ market. It’s more balanced.
The one important dimension would be inventory. Late in the year, we saw a lot more inventory for buyers to choose from, which gave them more room to negotiate, sometimes buying homes for less than the list price or getting concessions. But I think the complications to that, which I think you were kind of getting at in the way you phrased the question, is that affordability is still not great.
This is still not in sort of absolute terms, even relative to the last 30 years. Mortgage payments as a share of income are still unusually high, which isn’t terribly favorable for buyers. So, I think even talking about it as a buyer’s market, and how buyers are doing, is sort of presupposing that we’re talking about someone with the income and the credit and maybe some down payment wealth to really be participating in the market. Those individuals have a better negotiating position than we have seen in quite a while.
The final wrinkle, maybe, is this sort of push-pull dynamic between buyers and sellers. A lot of sellers cut their list price at some point, especially over the summer. And we saw an unusual number of delistings, too. And in those cases, those sellers could afford to walk away and wait. Maybe we’ll see them again this spring. I’m curious to see how that plays out.
So, this is a perfect way to segue into 2026. I love chatting with economists and one thing I find fascinating about economics is the emotional part. Of course, there are the charts and statistics, but then there’s what people feel about them. And it doesn’t always line up.
You’ve laid out the case that 2025 has been OK for the most part, but if you hear agents and consumers talk about it, it’s been terrible. Do you think there’s anything that will help people feel better about the economy and the housing market in 2026?
Yeah, that’s a great setup. That’s just a good way to put it. Kyla Scanlon coined the term ‘vibecession’ to talk about how the vibes felt as bad as a recession, even though we weren’t statistically there.
High interest rates play a significant role in bumming people out about the state of the economy and the housing market. That picture of the American Dream for millennials, Gen Z, and anyone else hoping to buy a home in 2023, 2024, or 2025 has been hard to come by. They’re not wrong to feel like the hurdle has gone way up, due to higher prices, higher mortgage rates, and higher home insurance costs.
So I think what might help people feel less bad about the state of the economy and housing market would be lower interest rates. My best case forecast for mortgage rates is that they probably end up in the six to six and a quarter range, maybe five and three-quarters. I would love to see some mortgage rates in the high fives. I think that could help. There’s almost like a psychological boost to seeing that mortgage rate start with a five.
The other thing that I think could and probably will help with housing market sentiment would be yet more inventory, a wave of new listings coming in the spring. And that would certainly help agents as well.
