Housing Market Cools as Economic Headwinds Build
Key takeaways
- Nationally, inventory grew for the 25th straight month (+12.6% year over year), but growth is slowing (Realtor.com).
- The unemployment rate jumped to 4.6% in November, the highest in over four years (WSJ).
- Consumer inflation eased to 2.7% in November, but the data was distorted by the government shutdown (WSJ).
- Retail sales stalled in October, signaling consumers are pulling back on spending (WSJ).
- Warehouse clubs like Costco are leaning heavily on private-label brands as shoppers push back on prices (WSJ).
- Homebuilder Lennar posted sharply lower profits as the housing market remains stagnant (WSJ).
Quick note:
As we head into the holidays, the housing market data is painting a clear picture: affordability pressures are weighing on both buyers and sellers. If you or your clients are thinking about making a move in 2026, now is the time to apply and understand your buying power. Reach out to Mortgage Craft to discuss your options!
The Housing Market Finds Its Footing—Slowly
According to Realtor.com‘s November 2025 data, the U.S. housing market is following the same steady pattern that’s defined most of 2025. Inventory rose for the 25th consecutive month, up 12.6% year over year, but the pace of growth continues to slow. Buyer activity remained subdued as homes stayed on the market longer (+3 days compared to last year) and prices eased slightly (-0.4% year over year).
Beneath the surface, two forces are quietly reshaping the market:
1. Surge in delistings: More frustrated sellers are pulling their homes off the market when price expectations aren’t met. In October, delistings increased 37.9% year over year, and about 6% of active listings came off the market each month since June, a rate normally reserved for the coldest months of December and January. Sellers usually start pulling homes off the market in October, with withdrawals reaching their highest point during winter’s seasonal slowdown. This year broke the pattern—delistings began climbing in June and maintained that elevated pace without interruption.
2. Rise of “refuge markets”: Cost-conscious buyers are strategically redirecting to smaller, more affordable metros. Cities like Grand Rapids, Cleveland, Milwaukee, and Pittsburgh—with prices well below national medians—saw some of the strongest price growth in 2025, with double-digit price-per-square-foot increases since 2022.
Regional divergence continues: The South and West lead inventory growth (+14.1% and +14.3% respectively), while the Northeast and Midwest lag significantly behind pre-pandemic norms (-48.4% and -32.9% respectively). This means markets like Lancaster County continue to behave differently than coastal and Sun Belt metros. We’re still in a buyer’s market in Lancaster, though that is shifting slowly over the past year.
Economic Storm Clouds Gathering
Several economic indicators released this week signal growing headwinds for the housing market and consumer spending.
Unemployment Jumps to 4.6%
The November jobs report showed the unemployment rate rose to 4.6%, the highest level in over four years, up from 4.4% in September. The economy added only 64,000 jobs in November, while October saw a loss of 105,000 jobs—meaning three of the past six months have seen job losses.
Federal government employment shrank by 168,000 jobs in October and November combined, as layoffs finally showed up in the data. But private sector weakness is also evident: manufacturing, transportation, warehousing, and temporary-help services all shed jobs. The construction sector added 27,000 jobs, but that’s a small bright spot in an otherwise cooling labor market.
What’s particularly concerning: the proportion of people working part-time but wanting full-time work jumped, and more discouraged workers have stopped looking for jobs altogether.
Consumer Spending Losing Steam
Retail sales were flat in October, decelerating from already-modest growth in September. This marks a significant slowdown from the 0.5% monthly growth average seen in 2024. Momentum for retailers has moderated as households face challenges on multiple fronts: sluggish hiring, extended job searches for the unemployed, decaying wage growth, and persistently elevated inflation straining personal budgets.
Americans are pushing back on higher prices. Warehouse clubs like Costco and BJ’s are ramping up their private-label strategies as fee-paying members gravitate toward cheaper store-brand alternatives. Costco’s Kirkland Signature brand now accounts for about a third of its $254.5 billion in annual revenue, and the company recently launched 45 new Kirkland products while cutting prices on items like chicken pot pies, bacon, and walnuts.
Grocery executives report shoppers are choosing smaller package sizes or shifting to more affordable stores. The message is clear: inflation-weary consumers have reached their limit.
Inflation Data Murky Due to Shutdown
Inflation eased to 2.7% in November, down from 3% in September, but economists are cautioning against reading too much into the report. The long government shutdown made it impossible for Labor Department workers to collect normal data, and the technical workarounds used may have biased the November figure downward.
Issues included missing October data that likely made November housing-cost increases look milder than they really were. Black Friday sales timing also distorted seasonal adjustments. Most analysts are essentially putting this report “to the side” and waiting for cleaner December data.
Homebuilders Struggling with Stagnant Market
Lennar, one of the nation’s largest homebuilders, posted a fourth-quarter profit of $490.2 million, down sharply from $1.1 billion a year earlier. The company continued offering incentives like mortgage rate buydowns to drive sales, pushing home deliveries up 4% while average sales prices fell to $386,000 from $430,000 last year.
Co-CEO Stuart Miller acknowledged the challenge: “While affordability and consumer confidence have remained challenging as interest rates moderated, we have focused on adapting to a new normal as the market finds its footing.”
Homebuilders remain hopeful for an uptick in demand during the spring selling season as interest rates potentially fall further. However, analysts note that the increase in existing homes for sale provides more competition to builders seeking to unload their inventory of new homes.
What Does This Mean for Lancaster County?
For Buyers:
- Stay financially healthy. With rising delinquencies on student loans, car loans, and credit cards, lenders are being more careful.
- Opportunity is building. While Lancaster’s market remains tighter than national trends, increasing inventory and homes staying on the market longer means more negotiating power. We’re seeing more price cuts the longer homes sit on the market.
- Get pre-qualified now. Understanding your buying power before spring is crucial. No matter where rates go in 2026, we want you to be able to purchase with confidence on the perfect home.
For Sellers:
- Price competitively from the start. The surge in delistings nationally shows what happens when sellers overprice. Buyers have more options and are being selective.
- Economic headwinds are real. Rising unemployment, slowing retail sales, and consumer pushback on prices signal that buyer confidence could weaken further. A slowing economy reduces the buyer pool, especially if unemployment continues to rise.
- Make your home stand out. With more inventory and homes taking longer to sell, staging, professional photos, and competitive pricing matter more than ever.
For Realtors:
- Educate clients on market realities. The “refuge market” trend shows buyers are willing to relocate for affordability. Lancaster County’s relative affordability compared to nearby metros like Philadelphia and Baltimore could be a selling point.
- Qualification is critical. With lenders tightening standards due to rising delinquencies, make sure your buyers are truly qualified before writing offers. Partner with Mortgage Craft to ensure your clients are qualified properly.
Market News: Interest Rates
Mortgage rates have remained relatively stable in recent weeks as markets digest mixed economic signals. The Federal Reserve is watching inflation data carefully to determine next steps on rate policy.
What’s moving interest rates in the days ahead:
With the holidays approaching, economic data releases will be lighter, but we’re monitoring:
Week of December 23:
- Consumer confidence
- Durable goods orders
- GDP (delayed report)
We’ll keep you updated on any major changes that could affect mortgage rates as we head into 2026.
