The Fed, Housing, and the 2026 Question: Why the Market Feels Stuck and Where Opportunity Is Emerging

If you’ve been paying attention to the news lately, it probably feels like everyone is talking about the same two things: the Federal Reserve cutting rates, and what that might mean for housing heading into 2026.

On the surface, it sounds simple. Lower rates should help affordability. More affordability should help the housing market move again.

But when you zoom out — and then zoom back in — the reality is more nuanced.

The Federal Reserve has been very clear in recent months: there is no clean or risk-free path forward.

If interest rates stay too high for too long, borrowing becomes expensive, spending slows, and the broader economy risks cooling too much. But if rates come down too quickly, spending increases, demand rises, and prices can climb again — bringing inflation right back into the picture.

That’s the stalemate.

And it’s important to remember one key distinction that often gets lost in headlines: the Fed controls short-term interest rates, not mortgage rates directly. Mortgage rates are driven by long-term bond markets and inflation expectations, which is why they don’t simply drop overnight after a Fed announcement.

So while rate cuts can help at the margins over time, they aren’t a magic switch for housing.

When you look at the housing market, you can see a very similar dynamic playing out.

Many homeowners are sitting on historically low mortgage rates from the past few years. Selling and buying again at today’s rates often creates an affordability issue, so a lot of would-be sellers simply aren’t motivated to move.

At the same time, inventory remains tight. Builders haven’t been able to add new supply at a pace that would meaningfully change the equation, largely because the cost to build is still high.

The result is a market where most of the movement we’re seeing right now falls into two buckets:

That’s part of why the market can feel uneven, cautious, or “stuck,” depending on where you’re looking.

One area where conditions look meaningfully different right now is the condo market.

In the 13-county Twin Cities metro, condo inventory is currently sitting at about 4.7 months of supply, up from roughly 4.0 months a year ago. Median days on market have also increased — from the mid-40s last year to around 62 days this November.

For context, single-family homes in the same metro area are still hovering around 2.2 months of supply, essentially unchanged year over year.

Higher inventory and longer days on market signal potential leverage. Buyers have more time, more options, and more room to negotiate than they’ve had with single family homes.

For some buyers, especially first-time buyers, condos can represent a more accessible way to enter the market while affordability remains a challenge in many single-family segments.

That opportunity comes with responsibility.

Buying a condo requires a closer look at details that don’t always apply to single-family homes. Reviewing association documents, financial statements, reserve studies, and any upcoming assessments for major repairs like roofs or siding is critical.

It’s also important to understand rental and short-term rental policies before buying — especially if long-term flexibility or future investment potential is part of the plan.

Done thoughtfully, a condo can be a practical entry point: a way to build equity, create future options, or even form the first piece of a longer-term real estate portfolio.

When you put it all together, this moment in housing makes more sense.

The Fed is balancing inflation and economic growth. The housing market is balancing affordability, supply, and buyer behavior. Neither has a single lever that fixes everything overnight.

For buyers and sellers alike, this is less about timing a perfect market and more about understanding where conditions differ — and how those differences create opportunity.

Clarity, right now, is the real advantage.