There is a subtle shift happening in housing that most headlines are missing. Buyer demand is rising again — mortgage purchase applications and pending contracts are at multi-year highs — even while mortgage rates sit around the mid 6 percent range and inventory growth is cooling. This combination matters because it shapes what 2026 could look like for buyers, sellers, and anyone thinking about relocating.
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Why demand is coming back (even though rates aren't rock bottom)
Mortgage rates peaked above 7 and even briefly approached 8 percent in the last couple years, which cooled demand dramatically. When rates started dipping back below the high sixes, buyers who had been on the sidelines began to reappear. That does not mean homes suddenly became cheap. It means monthly payments became slightly easier to swallow.
Purchase applications are a leading indicator.
Mortgage purchase applications typically convert into closed sales 30 to 90 days later. When applications trend higher for multiple weeks in a row, that usually translates into a healthier sales pipeline heading into the next calendar quarter.
What the purchase application trend is telling us
Purchase applications have been up year-over-year and increasing week-to-week for many consecutive weeks. This is significant. Think of the market as being stuck in a snowstorm for a while: you still need to buy, but moving around becomes difficult. As weather clears, people head to the store to get that milk. That is what lightweight improvements in mortgage conditions do: they unstick a portion of the pool of buyers.
Pending contracts just hit a multi-year high
Pending home sales are another timely measure. Contracts currently under way are at a four-year high. That matters because pending sales today produce closed sales in the coming 30 to 60 days.
Higher pending activity suggests the market is not frozen — it is thawing. Expect to see higher closings in the months that follow, provided rates remain relatively stable and economic conditions do not worsen sharply.
Why mortgage rates don't fall exactly when the Fed cuts
Many expect mortgage rates to move in lockstep with Federal Reserve policy — cut the Fed funds rate and mortgage rates should fall by the same amount. In practice that 1:1 relationship rarely happens. The Fed sets the short‑term policy rate (the federal funds rate), while long‑term mortgage rates are driven primarily by the 10‑year Treasury yield and the market for mortgage‑backed securities (MBS). Lenders price 30‑year fixed mortgages off the 10‑year because that Treasury is the closest liquid, long‑term benchmark; meanwhile investor demand for MBS, expectations for inflation and growth, bank funding costs, and technical factors in the bond market all feed into the final mortgage rate borrowers see. In other words, a Fed cut can lower short‑term borrowing costs almost immediately, but mortgage rates depend on how the market re‑prices longer‑term risk and return — which is influenced by many forces beyond the Fed’s current rate decision.
If the 10‑year Treasury stays elevated, mortgage rates will not fall much even after the Fed lowers short‑term rates because the long end of the yield curve is what matters for fixed, long‑duration loans. The gap between the 10‑year yield and the 30‑year mortgage — the spread — fluctuates with risk appetite, lending standards, prepayment and reinvestment expectations, liquidity in the MBS market, and investor demand for housing debt. In 2023 that spread widened dramatically (roughly +2.75 percentage points), reflecting higher risk premiums and strained market technicals; more recently the spread has tightened to nearer +2.0 points. That tightening is meaningful: for example, a 10‑year yield at 4.2% plus a 2.0% spread implies roughly a 6.2% 30‑year mortgage, whereas the same 10‑year with a 2.75% spread would push the mortgage close to 7.0%. Put simply, both the level of the 10‑year and the size of the spread matter — watch the 10‑year Treasury, MBS demand, and bank/lender behavior. When spreads narrow they can shave meaningful percentage points off mortgage rates even if the 10‑year doesn’t move much, and when spreads widen they can keep mortgage costs high despite Fed easing. If you’re shopping for a loan, that’s why lenders and mortgage markets often advise monitoring both signals and, depending on your timeline and tolerance, locking a rate when the combined picture looks favorable.
Inventory is growing, but growth is slowing
Inventory growth accelerated earlier this year, but that growth rate has slowed. The market now shows more listings than the pandemic trough — a healthy normalization — yet the pace of new inventory additions has cooled from earlier double-digit increases to low teen or single-digit percentages in many places.
That matters for pricing. More inventory gives buyers choices and prevents runaway bidding wars. But if inventory growth slows while demand ramps back, price pressure can return across certain price bands and neighborhoods faster than many expect.
A snapshot of the Omaha metro market
Local markets matter. Median closed sales prices in Douglas and Sarpy counties tell a useful story: median prices rose sharply during the pandemic wave, then flattened and are now showing signs of stabilizing. For example, the median closed price moved from roughly $230,000 in late 2020 to about $341,000 more recently. A 12-month rolling average shows that month-to-month volatility has smoothed and the curve is flattening.
New construction typically sits above existing-unit medians. New builds peaked in 2023 and are showing moderation back toward more typical levels. That adjustment is often builder-driven. Builders will pivot product and pricing to what buyers demand — more three-bedroom ranch plans instead of oversized five-bedroom models if that is where the buyers are.
Who is able to buy right now?
Affordability is the constraint. Wages are slowly rising, but not at the pace necessary to make middlemarket homes widely affordable again. The median age of a first-time homebuyer has crept up; many first-time buyers are in their late 30s or early 40s rather than their mid 20s. That reality skews who can step into ownership.
Two common ways buyers bridge the gap:
- Family assistance
— larger down payments or co-signers from older relatives.
- Alternative housing products
— manufactured homes, modular, or nonprofit-led infill projects aimed at creating starter units.
Programs like state or local housing finance authority offerings can also help. Many markets run first-time buyer programs that reduce down payment burden or provide favorable financing conditions. For Omaha, local NEIFA-type and lender programs exist to help qualified buyers access homeownership.
Why starter homes are scarce and what builders are doing
Starter homes have become less common for several reasons:
- Construction costs rose dramatically during the pandemic (materials, labor, logistics).
- Regulatory requirements and land development costs have increased per lot.
- Builders have shifted toward higher-margin product to cover rising build costs.
That said, pockets of affordable new construction do still exist, often thanks to creative approaches: infill lots, nonprofit partnerships, small-scale builders focused on starter product and owner-occupant restrictions that prevent investor flips. Those projects can deliver three-bed, two-bath homes in tighter price bands, but they are not always scalable across an entire metro without policy or cost changes.
Regulation, policy, and the cost-to-build
Regulatory changes add safety and long-term resilience, but they can also add cost. Stormwater mitigation, lot-size rules, electric vehicle charging requirements in new homes, and stricter appliance standards can each add hundreds to thousands per home. Over time those additions compound and push the breakeven price of new homes higher.
That is a major reason why affordable supply remains tight: the cost-to-build baseline keeps rising while demand for attainable units grows.
Practical steps for buyers and sellers today
For buyers:
- Get prequalified and keep a clear view of monthly payment versus purchase price.
- Consider alternative paths to ownership: smaller properties, accessory dwelling units, nonprofit or community land trust programs, and manufactured housing where appropriate.
- Plan for long-term holding if possible — owning builds equity over time and provides flexibility later.
For sellers:
- Price realistically. Overpricing results in expired listings and deeper price corrections later.
- Understand your market band. Some price tiers are seeing more buyer activity than others.
- Be prepared for negotiation. Homes sell for market value; expect buyers to push on price and terms when affordability bites.
“Homes sell for market value.”
That quote captures a core truth: sentiment and attachment do not change market mechanics. If you need to sell and are priced out of the market level you think you deserve, months of listing time can erode value more than accepting a realistic market offer.
What could 2026 look like?
If purchase applications and pending sales trends hold, the first half of 2026 could show a rebound in closed sales compared to the depressed sales totals of the prior years. That rebound will not necessarily return us to the frenzied competition of the pandemic, but it will likely produce a more active and balanced market where inventory and demand are closer to parity.
Two things to watch:
- The 10-year Treasury yield and the mortgage spread. A narrower spread plus a lower 10-year will push mortgage rates down meaningfully.
- Inventory growth. If it slows while demand accelerates, specific price bands will tighten and price pressure will return.
Local resources and programs
State and local homebuyer assistance programs are valuable tools for qualified first-time buyers. Loan programs, down payment assistance, and counseling can lower the barrier to owner-occupancy. If you are exploring first-time buyer options in Omaha, local housing finance authority resources and participating lenders are a good starting point.
Key takeaways
- Demand is increasing
— purchase apps and pending sales are at multi-year highs, signaling more closings soon.
- Rates matter, but stability matters more
— small rate improvements can bring back sidelined buyers; big rate swings create disruption.
- Inventory is better than the pandemic trough, but growth has slowed from earlier this year.
- Starter housing remains constrained
by construction costs and regulations; targeted programs and creative development help but are not yet scalable everywhere.
- Local differences are real
— markets like Omaha show different affordability and inventory dynamics than coastal metros.
FAQ
Is the housing market frozen?
The market is not frozen. Purchase applications and pending sales are rising, indicating more transactions are in the pipeline even though closings may lag. The market looks more like a thaw than a freeze.
Do falling interest rates mean homes are affordable again?
Falling rates make homes more affordable on a payment basis, but they do not reduce home prices directly. Affordability depends on the relationship between wages, home prices, taxes, insurance, and rates. Small rate improvements help, but broad affordability requires wages and entry-level supply to catch up.
What price point will bring sideline buyers back?
There is no single price point nationally. It depends on local incomes, debt levels, and inventory. Broadly, units priced within starter bands and with reasonable monthly payment profiles will attract sidelined buyers. Local market data is the best guide.
Can new construction make starter homes profitable again?
It can in pockets. Infill projects, nonprofit partnerships, and builders focused on compact, efficient plans have produced starter units at lower price points. Scaling that model across a region requires lower land and regulatory costs or subsidies to offset construction increases.
What should sellers do in the current market?
Price for today’s demand, not yesterday’s peaks. Prepare the home for sale to compete on condition and presentation, and be realistic about time on market. If you must sell quickly, expect buyers to negotiate on price and terms.
How should buyers prepare?
Get preapproved and understand monthly payment targets, cash requirements, and long-term plans. Explore down payment assistance programs if eligible, and be ready to act when a home meets your financial criteria.
Markets move in cycles. The last few years were unusual and created distortions that will take time to unwind. Right now, modest improvements in rates are coaxing buyers back into the marketplace and pending activity points to a busier spring and into 2026. Whether you are buying, selling, or planning a move, focus on data for your specific price band and geography, and plan with both your short-term needs and long-term financial health in mind.
Read More: 2026 Housing Market Update: The First Signals Are Already Here
