Housing Market Momentum Builds: What the Latest Data Reveals
The housing market is sending mixed signals, but a closer look at recent data suggests a cautiously optimistic outlook for 2026. After accounting for the typical holiday slowdown, we’re seeing encouraging signs of growth in purchase applications and pending sales, alongside stabilizing mortgage rates. But navigating this landscape requires understanding the interplay of economic factors, political developments, and evolving market dynamics.
Purchase Applications Surge, But Caution Remains
The first full week of tracking purchase application data in 2026 revealed a robust 16% week-over-week increase, coupled with a 13% jump year-over-year. This is a welcome change, but it’s crucial to remember that one week doesn’t make a trend. A sustained period of 12-14 weeks of positive growth is needed to confirm a genuine shift. Currently, we’ve only seen one positive week-to-week print, but the absence of negative prints is also encouraging.
Pending Sales Hit Multi-Year Highs
Weekly pending home sales data paints an even brighter picture. Last week’s figures were the highest in several years, demonstrating both year-over-year and multi-year growth. These pending sales typically translate into existing home sales 30-60 days later, suggesting continued momentum in the coming months. In 2026, we saw 50,096 pending sales compared to 44,866 in 2025.
The 10-Year Yield, Mortgage Rates, and Political Intrigue
Mortgage rates, currently hovering around 6.07%, are heavily influenced by the 10-year Treasury yield. Our 2026 forecast anticipated rates between 5.75% and 6.75%, with the 10-year yield fluctuating between 3.80% and 4.60%. Recent market activity, however, has been anything but predictable. The 10-year yield recently climbed to multi-month highs, reacting to comments from former President Trump regarding potential Federal Reserve leadership. Specifically, his expressed preference for Kevin Hassett to remain in his role, rather than Kevin Warsh, sparked a sell-off in the bond market.
Pro Tip: Keep a close eye on political developments, as they can have a surprisingly significant impact on bond yields and, consequently, mortgage rates.
The market’s reaction highlights the sensitivity to potential Fed policy shifts. While Christopher Waller remains a contender, the possibility of Warsh taking the helm appears less favored by the bond market. The coming weeks will be crucial in observing whether yields stabilize or continue to rise.
Mortgage Spreads: A Hidden Benefit
One of the most positive developments in the housing market has been the improvement in mortgage spreads – the difference between mortgage rates and the 10-year Treasury yield. These spreads have narrowed significantly, helping to keep mortgage rates lower than they would otherwise be. Historically, spreads ranged between 1.60% and 1.80%. Currently, the improvement is preventing rates from surging back above 7%, even with potential upward pressure from rising bond yields.
Inventory and New Listings: Balancing the Equation
Inventory levels are also a key factor. In 2025, inventory growth peaked at 33% year-over-year before cooling to 10% as demand picked up. Last week saw a 10.5% year-over-year increase, bringing the total inventory to 695,628. While maintaining growth is positive, the rate of increase is expected to moderate as we move into the spring buying season.
New listings, however, remain a concern. The goal is to consistently exceed 80,000 new listings per week during peak seasons. Last week’s figure of 50,303, compared to 45,835 in 2025, indicates progress, but more supply is needed to truly balance the market.
Price Cuts: A Sign of Market Adjustment
Price reductions remain a common occurrence, with roughly one-third of homes experiencing cuts. This is a natural part of the market as sellers adjust to changing conditions and increased inventory. With mortgage rates stabilizing around 6%, it will be interesting to see how this dynamic plays out in 2026.
Looking Ahead: Key Events to Watch
The week ahead is packed with potentially market-moving events. The PCE inflation report, a key metric for the Federal Reserve, will be released. Pending home sales data will also be closely watched. However, the political landscape could be the biggest wildcard. The Davos meeting, where Trump is expected to discuss housing policy and potentially announce a Fed Chair nominee, and the Supreme Court hearing regarding the Lisa Cook case, could both significantly impact market sentiment and bond yields.
FAQ
- What is a mortgage spread? It’s the difference between mortgage rates and the 10-year Treasury yield. Narrower spreads mean lower mortgage rates.
- Why are political events impacting mortgage rates? The market anticipates how political decisions might influence Federal Reserve policy and economic conditions.
- Is now a good time to buy a home? That depends on your individual circumstances. However, stabilizing rates and increasing inventory are creating more opportunities for buyers.
- What is the significance of the PCE inflation report? The PCE (Personal Consumption Expenditures) price index is the Federal Reserve’s preferred measure of inflation.
Did you know? Mortgage spreads improved significantly in 2025 and 2026, preventing rates from climbing even higher despite economic pressures.
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