Recent weekly pending sales data, which serves as a leading indicator for sales that will close in 30 to 60 days, shows a market that is sensitive to these shifts. While recent "snapbacks" in the data can be attributed to labor-related adjustments following holiday periods like Labor Day, the underlying trend remains one of caution.
Purchase application data, which looks even further ahead (30 to 90 days), has also shown significant softness. As rates have solidified above 7%, applications have faced difficult year-over-year comparisons. Last week, purchase applications were down 1% on a weekly basis but showed a staggering 19% decline compared to the same period last year. This suggests that the pool of active buyers is shrinking as affordability continues to be squeezed by the combination of high rates and high home prices.
Inventory Trends and the New Listing Landscape
Despite the slowdown in demand, housing inventory growth has remained exceptionally tame. In some weeks, inventory has actually contracted on a year-over-year basis. This lack of supply continues to provide a floor for home prices, even as demand wanes. The difficulty in growing inventory during periods of rising mortgage rates is a well-documented phenomenon; sellers are often reluctant to list their homes and trade a low existing mortgage rate for a much higher one—the "lock-in effect."
Currently, active listings are hovering near the 1 million mark, which is considered a return to "normal" for seasonal peak months. However, the growth expected from harder year-over-year comparisons has yet to fully materialize. New listings are currently in a typical seasonal decline. While 2026 has been the healthiest year for new listings since 2022—reaching over 80,000 per week at several points—the numbers are still a far cry from the 250,000 to 400,000 weekly listings seen during the housing bubble years.
Price Reductions and the 2026 Price Forecast
The percentage of homes seeing price cuts is another metric closely watched by analysts. Typically, about one-third of homes require a price reduction before selling. This year, price-cut percentages were lower than in 2025 until rates breached the 6.64% level. As rates stay high, it is expected that price-cut data will eventually surpass last year’s levels, especially as the demand-boosting effects of last year’s falling rates fade from the year-over-year comparisons.
The 2026 home-price forecast initially called for a modest national decline of -0.62%. However, achieving this has proven difficult, as most home price indexes currently show growth between 1% and 2%. Yet, with the recent surge in rates and the potential for further hikes, the year may still end closer to that original negative forecast as the market adjusts to the "higher-for-longer" reality.
The Week Ahead: Geopolitics and the Fed Take Center Stage
Looking forward, the conflict involving Iran and the Houthis remains the primary driver of market sentiment. As the U.S. midterms approach, the pressure on oil prices and the resulting headlines will likely keep the bond market on edge. While there have been some suggestions that international pressure from China and Iran might aim to rein in the Houthis to prevent a total loss of regional control, the situation remains fluid.
In addition to geopolitical developments, the market will be focused on upcoming new home sales data and a series of speeches from Federal Reserve officials. These speeches will be scrutinized for any clues regarding the depth and duration of the new rate-hike cycle. As investors and homebuyers look for a sign of relief, the coming week promises to be another pivotal chapter in the volatile 2026 housing story.
