The U.S. housing market is experiencing a period of modest recovery in existing home sales, driven by a 4.6% month-over-month increase in February 2026. Despite this uptick, the market remains characterized by elevated mortgage rates and tight inventory, which continue to influence affordability. This dynamic creates a complex environment for both potential homebuyers and investors in housing-related sectors.
| Region | Sales (SAAR) | Share |
|---|---|---|
| South | 1,890,000 | 46.2% |
| West | 790,000 | 19.3% |
| Midwest | 940,000 | 23.0% |
| Northeast | 470,000 | 11.5% |
| US Total | 4,090,000 | 100% |
Existing home sales in the U.S. rose to a seasonally adjusted annual rate of 4,090,000 in February 2026, marking a significant 4.6% increase month-over-month. This places current sales at the 67th percentile of historical data, indicating a relatively strong performance within its typical range. Inventory stands at 1,290,000 homes, translating to a 3.8 months supply, firmly categorizing it as a seller's market. Regionally, the South led sales with 1,890,000 units, followed by the Midwest at 940,000, the West at 790,000, and the Northeast at 470,000.
| Metric | Value (000s) | MoM | YoY |
|---|---|---|---|
| Housing Starts (Total) | 1,246 | -4.6% | -7.8% |
| Housing Starts (SF) | 874 | +5.4% | -7.8% |
| Building Permits (Total) | 1,411 | -0.3% | -1.2% |
| Building Permits (SF) | 878 | -0.2% | -9.2% |
Housing starts saw a decline, with total starts at a seasonally adjusted annual rate of 1,246,000 in October 2025, representing a 4.6% month-over-month decrease and a 7.8% year-over-year drop. Single-family starts accounted for 874,000 of this total. Building permits, a forward-looking indicator, also showed a slight contraction, with total permits at 1,411,000, down 1.2% year-over-year. This suggests a cautious approach from builders, despite the ongoing demand indicated by existing home sales.
| Month | EHS (M) | Median Price | Inventory | Months Supply |
|---|---|---|---|---|
| 2026-02 | 4.09M | $398,000 | 1,290,000 | 3.8 |
| 2026-01 | 3.91M | $396,800 | 1,220,000 | 3.7 |
| 2025-12 | 4.35M | $405,400 | 1,180,000 | 3.3 |
| 2025-11 | 4.14M | $410,000 | 1,440,000 | 4.2 |
| 2025-10 | 4.11M | $414,900 | 1,520,000 | 4.4 |
| 2025-09 | 4.05M | $412,300 | 1,530,000 | 4.5 |
| 2025-08 | 4.00M | $422,400 | 1,530,000 | 4.6 |
| 2025-07 | 4.01M | $425,700 | 1,550,000 | 4.6 |
| 2025-06 | 3.93M | $432,700 | 1,540,000 | 4.7 |
| 2025-05 | 4.04M | $423,700 | 1,540,000 | 4.6 |
| 2025-04 | 4.00M | $414,000 | 1,450,000 | 4.4 |
| 2025-03 | 4.02M | $403,100 | 1,330,000 | 4.0 |
| Metric | Value | YoY Change |
|---|---|---|
| NAR Median Price (US) | $398,000 | +0.3% |
| West | $603,100 | -1.9% |
| Northeast | $479,800 | +3.3% |
| South | $356,800 | +0.2% |
| Midwest | $302,100 | +2.3% |
| Case-Shiller National | 330.4 | +1.4% |
| 30-Year Mortgage | 6.11% | Elevated |
The median U.S. home price reached $398,000, showing a modest 0.3% year-over-year increase. This price level, coupled with a 30-year fixed mortgage rate of 6.11%, continues to challenge affordability for many buyers. The Case-Shiller National Index stands at 330.4, up 1.4% year-over-year, placing it at the 96th percentile historically, indicating high home values. While prices are still appreciating, the elevated mortgage rates, which are at the 12th percentile of their historical range (6-7%), contribute to a constrained affordability environment.
Regional home prices exhibit significant variation, with the West leading at a median of $603,100, followed by the Northeast at $479,800. The South recorded a median price of $356,800, while the Midwest remained the most affordable region at $302,100. In terms of sales volume, the South dominated with 1,890,000 units, highlighting its continued market activity. The West and Northeast, despite higher prices, saw lower sales volumes, suggesting price sensitivity or limited inventory in those regions.
Periods when existing home sales were within ±10% of current level:
| Date | EHS (SAAR) | Diff |
|---|---|---|
| 2025-11 | 4,140,000 | +1.2% |
| 2025-05 | 4,040,000 | -1.2% |
| 2024-11 | 4,170,000 | +2.0% |
| 2024-05 | 4,060,000 | -0.7% |
| 2023-11 | 3,910,000 | -4.4% |
| 2023-05 | 4,190,000 | +2.4% |
What typically happened after similar EHS levels:
| Metric | 3M | 6M | 12M |
|---|---|---|---|
| EHS Change | +0.7% (50%+) | +2.5% (57%+) | -0.6% (33%+) |
| XHB Return | +16.0% (88%+) | +16.7% (86%+) | +40.7% (67%+) |
Median return shown, with percentage of periods positive in parentheses.
Current existing home sales levels, at 4,090,000, are within a range seen in several periods over the past two years, such as November 2025 (4,140,000) and May 2025 (4,040,000). Historically, after similar sales levels, existing home sales have shown a median positive return of 2.5% over 6 months, but a median negative return of -0.6% over 12 months. Interestingly, the XHB ETF has historically performed well after such periods, with a median return of +16.7% over 6 months and a robust +40.7% over 12 months, suggesting potential for homebuilder outperformance.
| Stock | Price | Open Gap | 1M | 6M | 1Y | YTD |
|---|---|---|---|---|---|---|
| LEN Lennar | $99.94 | -0.16% | -13.4% | -29.3% | -19.7% | -2.8% |
| ITB iShares U.S. Home Construction | $97.85 | -0.35% | -9.6% | -15.9% | -0.7% | +1.6% |
| KBH KB Home | $57.36 | -0.56% | -6.9% | -15.6% | -10.2% | +1.7% |
| XHB SPDR S&P Homebuilders ETF | $105.20 | -0.66% | -8.8% | -11.6% | +4.5% | +2.2% |
| NVR NVR Inc | $6872.03 | -1.12% | -14.6% | -19.2% | -8.3% | -5.8% |
| PHM PulteGroup | $126.66 | -1.16% | -5.5% | -9.7% | +17.7% | +8.0% |
| TOL Toll Brothers | $147.13 | -1.81% | -2.3% | +0.0% | +33.3% | +8.8% |
| DHI D.R. Horton | $147.69 | -2.00% | -6.6% | -18.8% | +10.9% | +2.5% |
Homebuilder stocks have shown mixed performance year-to-date, with the iShares U.S. Home Construction ETF (ITB) up 1.6% and the SPDR S&P Homebuilders ETF (XHB) up 2.2%. Individual builders like PulteGroup (PHM) and Toll Brothers (TOL) have seen strong YTD gains of +8.0% and +8.8% respectively. However, some major players like Lennar (LEN) and NVR Inc (NVR) are down -2.8% and -5.8% YTD, and most builders experienced declines over the last month, with NVR Inc. down 14.6% and Lennar down 13.4%.
| Stock | Price | Open Gap | 1M | 6M | 1Y | YTD |
|---|---|---|---|---|---|---|
| HD Home Depot | $353.56 | -0.15% | -7.5% | -15.6% | -5.7% | +2.7% |
| LOW Lowe's | $250.22 | -0.38% | -9.0% | -6.9% | +4.4% | +3.8% |
Home improvement retailers Home Depot (HD) and Lowe's (LOW) have also experienced recent declines, with HD down 7.5% and LOW down 9.0% over the last month. Despite these short-term dips, both stocks maintain positive year-to-date returns, with HD up 2.7% and LOW up 3.8%. This suggests that while existing homeowners may be facing some headwinds, the underlying demand for home improvement projects remains resilient, possibly due to a combination of aging housing stock and homeowners opting to renovate rather than move in a high-rate environment.
The current housing market, characterized by rising existing home sales but elevated mortgage rates and tight inventory, presents nuanced implications for broader equities. Housing-sensitive sectors, including homebuilders, building materials, and home furnishings, will likely continue to experience volatility. While homebuilders have historically shown strong forward returns after similar periods, individual stock performance is diverging. The S&P 500's flat performance over the last month and slight YTD decline (-0.7%) suggests that housing trends are not currently a strong tailwind for the broader market.
Given the historical tendency for homebuilder ETFs like XHB to show strong forward returns after periods of similar existing home sales, a tactical overweight to this sector could be considered for investors with a longer-term horizon. However, the recent monthly declines in individual builder stocks and home improvement retailers suggest caution and selective stock picking. Investors should monitor mortgage rate trends and inventory levels closely, as these will be key determinants of sustained housing market momentum. A balanced approach, potentially favoring quality homebuilders with strong backlogs and efficient operations, while maintaining exposure to resilient home improvement names, may be prudent.