Why Pending Home Sales Are Falling Despite High Buyer Demand in 2026

The primary driver behind the recent dip in pending home sales is a severe shortage of housing inventory, not a lack of buyer interest. In December 2025, the Pending Home Sales Index (PHSI)—a forward-looking indicator of home sales based on contract signings—declined for the fourth consecutive month. However, sales activity remained significantly above pre-pandemic levels, underscoring a market defined by strong demand outpacing critically low supply. This imbalance continues to put upward pressure on home prices across most U.S. regions.

What is the Pending Home Sales Index (PHSI) and What Does It Show?

The Pending Home Sales Index (PHSI) is a leading indicator released by the National Association of Realtors® that measures housing market activity where a sales contract has been signed, but the transaction has not yet closed. A drop in the index suggests a slowdown in future closed sales. The 0.3% decline in December 2025 points to a market constrained by a lack of available homes for sale, rather than weakening demand. In fact, compared to 2019, pending sales were still up by a substantial 21%, indicating the underlying strength of the housing market.

Why Are Pending Home Sales Declining If Demand Is So High?

Based on our experience assessment, the decline is almost entirely attributable to a record-low supply of homes on the market. When there are fewer listings, there are fewer opportunities for buyers to sign contracts, which directly impacts the PHSI. Lawrence Yun, Chief Economist for the National Association of Realtors®, confirmed this view, stating, “Pending home-sales contracts have dipped during recent months, but I would attribute that to having too few homes for sale. There is a high demand for housing and a great number of would-be buyers.” This creates a cycle where potential sellers are hesitant to list their current home for fear of not finding a suitable new one to purchase, further perpetuating the inventory shortage.

How Did Different U.S. Regions Perform in December 2025?

The regional data from December 2025 reveals a varied picture, highlighting that the inventory crunch is not uniform across the country:

• Northeast: Pending sales increased by 3.1%.
• South: Sales saw a modest rise of 0.1%.
• West: Sales were flat, showing no change.
• Midwest: This was the only region to experience a significant decline, with a 3.6% drop in pending sales.

This regional variation suggests that local market conditions, including the pace of new construction and demographic trends, play a critical role in inventory levels.

What Is the Outlook for the Housing Market in 2026?

The outlook for 2026 hinges on whether the supply of homes for sale can increase to meet persistent demand. Economists suggest that price acceleration is likely to continue in the near term due to these inventory constraints. As Ruben Gonzalez, Chief Economist at Keller Williams, noted, “Demand for existing homes remains strong but supply is likely restraining sales figures. We expect to see continued price acceleration... as a result of record-low inventory levels.” For the market to balance, a meaningful increase in new listings from homeowners and a ramp-up in new home construction will be necessary.

For buyers in 2026, the key is preparation: get pre-approved for a mortgage and be ready to act quickly when a suitable property is listed. For sellers, the current market presents a significant opportunity due to high demand and limited competition, but it’s crucial to have a clear plan for your own subsequent housing move before listing.