Housing Market Momentum Continues into 2026: What the Latest Data Reveals
The housing market is showing surprising resilience as we move further into 2026. Recent data indicates a sustained positive trend in both purchase applications and pending sales, defying expectations given the current interest rate environment. But what’s driving this momentum, and what can buyers and sellers expect in the coming months?
Purchase Applications and Sales: A Promising Start
Mortgage purchase application data continues to impress. We’ve now seen two weeks of double-digit year-over-year growth – a significant shift considering the higher baseline of 2025. Last week alone saw a 5% week-over-week increase and an 18% jump compared to the same period last year. This suggests a genuine increase in buyer demand, not just an easy comparison to a weaker 2025.
These applications typically precede actual sales by 30 to 90 days, meaning the positive trend is likely to translate into stronger existing home sales figures in the near future. Weekly pending home sales echo this sentiment, hitting the highest level in several years.
Mortgage Rates and the 10-Year Yield: Navigating Volatility
Despite global economic uncertainties – including events like the Davos summit and volatility in the Japanese bond market – mortgage rates have remained relatively stable. Last week saw a slight increase, moving from 6.07% to 6.21%, but this was arguably contained given the external pressures. Mortgage News Daily reported a rate of 6.19% at week’s end, while Polly data showed a weekend rate of 6.23%.
Our 2026 forecast anticipated rates between 5.75% and 6.75%, with the 10-year yield fluctuating between 3.80% and 4.60%. The key takeaway? The market isn’t spiraling out of control, and rates are remaining within a predictable range.
Pro Tip: Keep a close eye on the 10-year Treasury yield. It’s a leading indicator of mortgage rate movements.
The Role of Mortgage Spreads: A Hidden Benefit
A crucial factor keeping rates in check is the improvement in mortgage spreads. Spreads represent the difference between mortgage rates and the 10-year Treasury yield. Historically, they’ve ranged from 1.60% to 1.80%. Last week, they closed at 1.82%. While slightly elevated, this is significantly better than the peaks seen in 2023.
This improvement means that even with similar bond market conditions as last year, rates are lower now. Had spreads been at their 2023 highs, we’d be looking at mortgage rates closer to 7.48%!
Inventory and New Listings: A Balancing Act
Inventory levels are slowly normalizing, but growth has slowed since mid-2025. The year-over-year growth rate has decreased from 33% to 9.81%. While this slowdown is expected due to tougher comparisons, any year-over-year growth is still a positive sign.
New listings are also encouraging, with 53,920 new listings reported last week, compared to 50,946 the previous year. The goal is to consistently exceed 80,000 listings per week during peak seasons, a level not consistently reached in 2025.
Price Reductions: A Sign of Market Adjustment
Approximately one-third of homes are undergoing price reductions, a typical reflection of market dynamics. As inventory increases and rates remain elevated, sellers are adjusting their expectations. However, with rates stabilizing around 6%, the pressure to drastically cut prices may ease.
Looking Ahead: The Fed, Inflation, and Geopolitical Factors
This week is a critical one, with the Federal Reserve meeting. While no rate changes are anticipated, Jerome Powell’s final Q&A session before a potential leadership change will be closely scrutinized. The market will also be watching for reactions to the president’s announced tariff on Canada, should a deal with China be reached.
Furthermore, upcoming reports on home prices and PPI inflation will provide valuable insights into the overall health of the housing market and the broader economy.
Did you know? The PPI (Producer Price Index) measures changes in the prices received by domestic producers for their output. It’s a key indicator of inflation and can influence mortgage rates.
FAQ
- Is now a good time to buy a home? It depends on your individual circumstances. However, the current data suggests a more balanced market than we’ve seen in recent years.
- What is a mortgage spread? It’s the difference between mortgage rates and the 10-year Treasury yield. A smaller spread means lower mortgage rates.
- How will the Fed meeting impact mortgage rates? While the Fed isn’t expected to change rates this week, their commentary could influence market expectations and, consequently, mortgage rates.
- Is housing inventory increasing? Yes, but the rate of increase has slowed compared to last year.
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