US housing market dynamics are shifting as builders aggressively clear inventory to make room for a new construction cycle. New single-family home sales for December 2025 retreated by 1.7% to a seasonally adjusted annual rate of 745,000 units. Despite this slight cooling from recent four-year highs, the figures exceeded market expectations of 730,000, signaling resilient demand. Builders have successfully reduced the backlog of unsold homes, with total inventory falling 2.7% to 472,000 units. The supply of single-family homes under construction has reached a critical 5-year low of 587,000 units. This destocking process is viewed as a strategic pivot, allowing developers to break ground on fresh projects as market conditions improve. Early February 2026 data shows a significant rebound in construction activity. Housing starts for January surged nearly 4% to an annualized rate of 1.48 million units, far outpacing the 1.34 million projected by analysts. Simultaneously, building permits—a key indicator of future growth—climbed to 1.52 million units, the highest level of permitting activity since early 2024. Mortgage rates are providing much-needed tailwinds for affordability. The average 30-year fixed-rate mortgage fell to 6.01% as of late February, the lowest level since September 2022. This represents a significant drop from the 6.85% seen during the same period last year. While the national average APR sits at 6.14%, the downward trend is reviving buyer interest and fueling a 132% year-over-year surge in refinance applications. Pricing remains a point of contention for buyers. The median sales price for a new home stood at $414,400 in December, a 4.2% increase from the previous month. While 36% of builders reported cutting prices by an average of 6% to lure buyers, high land and labor costs continue to keep floor prices elevated. Regional performance varies sharply. The Midwest and West saw sales growth of 31.7% and 9% respectively, while the Northeast suffered a 37.3% plunge. Builder sentiment remains cautious, with the NAHB Housing Market Index dipping to 36 in February. However, the surge in permits suggests that the industry is preparing for a robust spring season as borrowing costs hover near the psychological 6% threshold.