Housing demand has slowed, but still stable for now

Higher mortgage rates have tended to slow housing data over the past few years and that has been the case in 2026. But this year has been a bit more orderly since mortgage rates haven’t broken over 7%, and last week was another example of that.

As always with my work, I believe mortgage rates above 6.64% slow housing demand, but I haven’t seen any major material changes this year beyond growth slowing to flat or slightly negative year over year. We also have to be mindful that year-over-year comps showing growth in housing demand will be difficult, as rates were falling at this time last year.

One concern I always have with higher rates is whether sellers will call it quits and new listings will start to show negative year-over-year data, but that hasn’t happened yet this year. In fact, new listings have been very steady for the past few months. This ties into my theme that the housing story has been fairly stable in 2026, even with all the drama outside the housing world.

New listing data

One key to a healthier housing market post-COVID was getting new listings data back to normal, because most home sellers are buyers. And a lot of people believed that until rates fell, who would be crazy enough to sell the home they had at a 3% rate to buy at above 6%? Except this has been happening since 2022. If it wasn’t happening, existing home sales would have had more downside and new listings data would have been much lower than what we have seen the past few years.

New listings data, even though it’s in its seasonal decline, looks fairly stable to me over the last few weeks with rates elevated, and this is a healthy aspect of housing in 2026. We have had a few weeks this year with over 80,000 new listings during the seasonal peak months, which was the highest we have seen in years — another positive.

Normally, new listings range between 80,000 and 100,000 every week during peak periods. For those who believe the new listings data resembles the housing bubble years: during that time, new listings ranged from 250,000 to 400,000 per week for several years.

Here is last week’s new listings data for the past two years:

2026: 66,874
2025: 63,762

Housing inventory

Housing inventory has had the mildest growth this year versus other recent years, but as mortgage rates move above 6.64%, inventory growth has picked up just as it should, and year-over-year comps will make it easier to show growth for the rest of the year.

That’s because mortgage rates were heading lower last year at this time, and inventory growth started to slow a lot. Last week we saw mild week-to-week growth, and year-over-year growth is now 2.21% — even with elevated rates and easier comps. As you can see below, last year’s inventory fell week-to-week as rates were heading lower.

Weekly inventory change (Aug. 21–Aug. 28): Inventory rose from 874,784 to 879,764
Same week last year (Aug. 22-Aug. 29): Inventory fell from 861,226 to 860,719

Price-cut percentage

Typically, about one-third of homes see price reductions before they sell, reflecting the housing market’s dynamic nature. Overall, this year’s price-cut percentage was slightly lower than last year. Now, as mortgage rates have risen versus last year, I have expected in the last few weeks for this data to come to par and go higher, and last week is slightly higher year over year.

In my 2026 home-price forecast, I called for a national decline of 0.62% for the year. Home-price growth really isn’t going anywhere this year, and my forecast of -0.62% might be hard to achieve, as most home price indexes show price growth between 1% and 2%. However, with rates rising again, I might be right in 2026 if the trend to higher rates, higher inventory and higher price cuts sticks.

The price-cut percentage for last week:

2026: 42.10%
2025: 42%

10-year yield and mortgage rates

In the 2026 HousingWire forecast, I anticipated the following ranges:

Mortgage rates between 5.75% and 6.75%
The 10-year yield fluctuating between 3.80% and 4.60%

Last week ended with Fed Chair Kevin Warsh giving a decent speech at the Jackson Hole symposium, saying he will vote for rate hikes if inflation data doesn’t improve. I found this positive, but it did send the 10-year to close near yearly highs. A lot of Fed hawks talked about rate hikes last week too, so this week’s jobs data will be key to see if other voting members will join in.

Outside of that, it was a fairly mild week for mortgage rates up until Friday, when the second pricing of rising yields took mortgage rates toward 6.81%. We are close to yearly highs in the 10-year yield and mortgage rates, but we’ve really stuck in a channel with the 10-year yield for many weeks between 4.62%-4.74%.

Mortgage spreads

Mortgage spreads once again have saved the day and kept mortgage rates under 7% for another week. Not that long ago, I wrote about why it will be hard to get rates above 7%. I am telling you, we have thrown everything except Godzilla and King Kong at mortgage rates, but the spreads have done their part to keep rates below 7%.

For rates to break over 7%, the Iran conflict would really need to get worse, sending oil and diesel prices higher for longer. Or, the labor data would need to get much better. We could also get higher rates if the Fed gets more hawkish; for now, the spreads have held the line for another week, but we are close.

Historically, mortgage spreads have ranged from 1.60% to 1.80%. Last week, spreads were at 1.97%, up from 1.96% the week before.

Let’s compare last week’s mortgage rates to where they would have been over the last three years, given the 10-year yield’s current level:

If we had the worst mortgage spread levels of 2023, mortgage rates would be 7.95% today, not 6.81%.
If we had the worst levels of 2024, mortgage rates would be 7.57% today.
If we had the worst levels of 2025, mortgage rates would be 7.38% today.

Weekly pending sales

Our pending home sales data provides a week-to-week perspective, though holidays and short-term fluctuations can affect results. This weekly pending sales data typically takes 30-60 days to be reflected in the sales data.

Now that we have spent more time above my key mortgage rate level of 6.64%, the slowdown in sales is more apparent. It’s not a big negative slowdown year, but we’re showing negative year-over-year data in bigger numbers. For the past few years, when rates get near 6%, housing demand grows, then that growth fades when rates get over 6.64%.

Last week the year-over-year data was pretty much flat and comps make it harder to show growth because mortgage rates were falling at this time last year. If mortgage rates were well north of 7% with duration, the demand weakness would be more apparent, but so far mortgage rates haven’t broken over 7%.

Here are the pending sales for last week over the last two years:

2026: 65,036
2025: 65, 701

Purchase application data

Purchase application data, which looks out 30-90 days, has shown softness as mortgage rates have gotten above 6.64%. For a while, purchase applications grew every week this year compared to last year, but we’ve recently had five mild negative year-over-year prints. This is not abnormal with mortgage rates above 6.64%.

Last week, this index was flat week-to-week but down 5% year-over-year. Just remember the comp story here going out the rest of the year, on the year-over-year data.

Here are the stats on purchase apps so far in 2026:

13 positive week-to-week prints
17 negative week-to-week prints
3 flat week-to-week prints
10 weeks of double-digit year-over-year growth
25 weeks of positive year-over-year growth
7 negative year-over-year prints

The week ahead: Iran, Canada and Jobs week

As I discussed in this recent article, if you want lower rates, you need this Iran conflict over, and you don’t want the new trade war with Canada to get out of hand; the rest will take care of itself. The Fed hawks hate the trade war,and they hate the Iran conflict. Unless the labor market gets much worse, the hawks run the show on where rates will go.

This week is jobs week, and I believe we would need a solid jobs report to get the required four more Fed governors to raise rates in September. However, so much is priced into rates now that rate hikes don’t matter as much as taking care of the conflict and trade war. So it will be interesting to see how the bond market reacts to the data next week, as we have been stuck in a trading range for a month now.