August 11, 2026
.
Existing home sales declined 1.7% in July to 4,060 thousand after falling 1.4% in June. .Home sales have been floundering at about this same pace for the past two years.
Lawrence Yun, NAR chief economist said that. “Home sales have been remarkably stable, even amid the rising mortgage rate environment of the past few months. Year-to-date sales are up 2.4% and there’s no doubt that the housing market would be thriving if average mortgage rates were to return near 6%.”
Mortgage rates have risen to 6.6%. The war in Iran has curtailed the flow of oil from the Mideast and oil prices climbed from $65before the war to about $83. It is hard to see a resumption of oil production any time in the near future. As a result, the CPI should accelerate this year to 3.5% versos 2.7% in 2025. The core rate should be quite steady at 2.5% this year versus 2.6% in 2025. The Fed under new Chair Kevin Warsh appears to be serious about shrinking the inflation rate back to the 2.0% mark. As a result, the Fed is widely expected to increase the funds rate by 0.25% between now and yearend to 3.9%. For what it is worth, we expect mortgage rates to inch lower from 6.6% to perhaps 6.4% by yearend.
The average home sat on the market for 29 days in July compared to 28 days in June and also in June of last year .. That is still a relatively short time period by any historical standard, but it is not as short as it used to be. The housing market has clearly softened, but it has not collapsed.
There are still few homes available for sale but the inventory has been increasing. The number of homes on the market is now at 4.6 months and it is gradually rising. The inventory remains short of the 5.0 month supply that is required to balance the demand for and supply of homes. At some point homeowners who have been reluctant to sell will have to put their houses back on the market. Eventually the inventory level will get back to the desired 5.0 month supply but that may not occur until next year..
.
The shortage of homes available for sale is preventing a sharp drop in home prices. Home prices 2.2% in July to $434,1200 after gaining 2.7% in June. The year-over-year change is now 2.0%. Look for little change in home prices in 2026.
Housing affordability is dependent on three factors — home prices, mortgage rates, and consumer income. Jobs growth is climbing slowly which boosts consumer income, Mortgage rates may decline slightly. And home prices should be relatively steady. As a result, housing affordability should climb slightly in the months ahead and the median-income earning family will have about 15% more income than required to purchase a median-priced home by the end of 2026.
.
Given all of the above we expect existing home sales to decline 2.0% in 2026 and be at 4,185 thousand by the end of the year.
We expect to see 3.5% GDP growth in the third quarter and 2.3% growth for the year as a whole.
Stephen Slifer
NumberNomics
Charleston, S.C.
Follow Me