Sales of previously occupied US homes bounced back in February as shoppers benefited from easing mortgage rates and more properties hitting the market. The increase marks a shift after years of stagnant activity, with buyers finally getting some relief from rates that had climbed above 7% in 2023. The 30-year fixed-rate mortgage averaged 6.11% as of March 12, 2026, down from 6.65% a year ago at this time. That drop might seem modest, but it's enough to bring hundreds of thousands of sidelined buyers back into the market. Despite double-digit growth in purchase applications for much of 2025, existing home sales increased only modestly from 2024, showing just how sensitive the market has been to even small rate movements.

But here's where things get complicated. New research presented at the Hoover Institution in September 2025 challenges what most people think is happening. The standard view says that restrictive zoning and regulations are strangling housing supply, driving up prices in places like California and New York while keeping them affordable in Houston or Dallas. The authors find that higher income growth "predicts the same growth in house prices" across cities—meaning that whether a city makes it easy or hard to build doesn't seem to matter much when demand surges. This suggests that "relaxing regulatory housing supply constraints may not materially affect housing affordability." If that's right, it upends the conventional wisdom that we just need to "let people build" and prices will fall.

The dynamic playing out right now shows how mortgage rates and inventory interact in real time. Millions of homeowners locked in mortgage rates below 3-4% during the pandemic, and selling today means trading that rate for one at 6%+—potentially hundreds of dollars more per month, with about 81% of US mortgages still carrying rates below 6%. That's the "lock-in effect" that's kept inventory tight for years. But as official data shows, prices are still climbing even with higher rates—up 1.8% year-over-year—because there simply aren't enough homes to go around. The improvement in February sales came largely because more owners finally decided that life changes (new jobs, growing families, downsizing) matter more than holding onto a cheap mortgage forever.

What's next depends on whether rates keep drifting down or bounce back up. Mortgage rates are expected to range from 5.75% to 6.75% in 2026, and each quarter-point move brings thousands more buyers into—or pushes them out of—the market. The real question is whether the Hoover research is onto something deeper: that no matter how many homes get built or how low rates go, rising incomes will keep pushing prices higher in desirable cities. If true, the dream of broadly affordable homeownership in places people actually want to live might require rethinking the entire equation—not just tweaking interest rates or zoning codes.