The National Association of Realtors just declared we’re in “a new housing crisis.” They’re not wrong, but they’re also not telling you the whole story.
January home sales collapsed 8.4% from December. That’s the biggest monthly drop since February 2022 and the slowest pace since December 2023. Sales hit just 3.91 million units (annualized), down 4.4% year over year. Meanwhile, the median home price climbed to $396,800, a record high for January.
NAR’s chief economist Lawrence Yun calls this a crisis because “Americans are stuck.” Translation: the housing market has frozen solid, and most people can’t afford to make a move.
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The Inventory Paradox Nobody Wants to Address
Here’s the contradiction that should keep every mom-and-pop investor awake at night: inventory rose 3.4% year over year to 1.22 million homes. At the current sales pace, that’s just a 3.7-month supply. A balanced market needs six months.
We’re simultaneously experiencing a supply crisis AND falling sales. That shouldn’t be possible unless something fundamental has broken in the market. What broke? Simple math. At current prices and interest rates, the typical American family cannot afford to buy a home.
The data tells the real story: sales of homes priced below $250,000 dropped the hardest. The only segment that grew? Properties over $1 million. This isn’t a healthy market. This is wealth consolidation playing out in real time.
The Federal Reserve’s Housing War
We’ve been warning about this for years: the FED has explicitly targeted housing and shelter costs in their inflation fight. They’ve mentioned it in every meeting since 2020. Just last July, a Fed president admitted they were “very surprised by how resilient the housing market is.”
That resilience comes from one thing: inventory scarcity. And when the Fed can’t break housing prices through normal monetary policy, they get creative. Higher rates for longer. Tighter lending standards. Anything to force prices down and reduce shelter inflation.
The problem? This strategy benefits exactly one group: Wall Street and private equity firms sitting on $110 billion in capital, ready to scoop up distressed properties from struggling small investors once the pain gets bad enough.
What This Means for Rental Property Investors
First-time buyers made up 31% of January sales, up from 28% a year ago. That sounds positive until you realize it’s still historically low. For context, first-time buyers typically represent 40% of sales in a healthy market.
These aren’t people choosing to rent. These are people trapped in rentals because homeownership has become mathematically impossible for them. When someone with buy-ready credit at 750+ can’t qualify for a mortgage due to debt-to-income ratios, you know the system is broken.
Days on market increased from 41 to 46 days year over year. Homes are taking longer to sell despite record-low inventory. That’s not normal market behavior. That’s a sign of fundamental affordability collapse.
The Long Game Gets Longer
Since January 2020, the typical homeowner has accumulated $130,500 in housing wealth, according to NAR. That sounds impressive. It’s also a wealth transfer from renters to existing owners that can never be recovered.
This creates a vicious cycle: as home prices rise faster than incomes, more families get pushed into the rental market permanently. They’re not building equity. They’re not accumulating wealth. They’re stuck, paying someone else’s mortgage and property taxes through rent.
The opportunity for small rental investors exists in understanding this reality and adapting to it. Quality matters more than ever. Properties that offer genuine value to residents, not exploitation, will thrive. Those that chase maximum rent from desperate people will face evictions, turnovers, and mounting repair bills that destroy any paper profits.
Important Steps to Rent Your Home Out from A to Z
Step by step checklist for getting a home rented, and link to the full property management guide
1 Consider strengths and weaknesses for your home and location and consider special strategies to utilize them. Is it a college area? If so, you’ll likely handle a lot differently from low income, or a suburb
2 Get the property in show-ready condition by handling repairs, but also low-cost aesthetic fixes like spray painting rusted AC grates, and other things that really stand out. A sure way to attract sub-par tenants and repel the rest is to show a home with unrepaired issues
3 Decide whether you’re going to allow pets or not. Before you decide, know that for most landlords it’s the single best thing you can do to increase your “bottom line” profit over the long term. More on this subject here
4 Set a rental rate that will balance a minor amount of time on market hassle, with monthly rate. Whether in the form of owner-occupied showings, stress, or vacancy. Most owners fail to properly account for these subtle but real costs, especially vacancy. Vacant homes are much more costly than most account for. We can provide a free rental rate estimate compiled by people, not an algorithm, here
What We’re Watching
The spring market traditionally brings renewed activity. We’re now in mid-February 2026, entering what should be the early ramp-up period. If these January numbers hold through March and April, we’ll see more forced sales, more distressed inventory, and more opportunities for well-capitalized buyers to acquire properties at reasonable prices.
But the clock is ticking differently for different investors. Those carrying high-interest debt on rental properties with thin margins are playing a dangerous game. Those who prioritized quality residents, maintained proper reserves, and avoided overleveraging will weather this storm and emerge stronger.
The housing crisis is real. What NAR won’t tell you is that it’s been engineered, at least in part, by policy decisions designed to cool inflation at any cost. The cost? Homeownership dreams for millions of Americans and potential financial ruin for small investors who didn’t see this coming.
We saw it coming. We’ve been preparing for years. The question is: did you?
For more information, visit January home sales tank more than 8% with potential buyers struggling.
