Housing demand still showed positive year-over-year growth last week, despite the hawkish Fed, escalation of the Iran conflict, rising mortgage rates and the 10-year yield hitting yearly highs. We had year-over-year growth in our weekly pending sales, total pending sales and purchase apps.
 
Growth has slowed down over the past few weeks as mortgage rates have gotten above my key level of 6.64%. The longer we stay above 6.64%, the softer housing demand gets. This has typically been the case over the past few years.

However, for now, considering everything that has happened since the Iran conflict 2.0 has surged and the Fed has gotten very hawkish, housing is doing ok. Of course, mortgage spreads being better in 2026 is the housing hero story of the year, but there is another variable as well.

Mortgage spreads

To make this as simple as possible, if mortgage spreads hadn’t improved as they typically do at this stage of the cycle, the housing data would look very different this year.

The only reason mortgage rates got near 6% in 2023, 2024, 2025 and 2026 was that an economic/labor growth scare pushed the 10-year yield below 4%. This was never due to Fed policy, but the bond market attempting to get ahead of the Federal Reserve being too restrictive with policy.

In the past few years, mortgage spreads were not close to normal, so rates pushed above 7% fairly easily when the economic data improved, but 2026 was the first year I didn’t forecast rates above 7% — solely because of the improvement in spreads.

Even today, with the 10-year yield at 4.74%, a hawkish Federal Reserve and a crisis in the Middle East that has sent Brent Crude oil prices above $100 twice and inflation above target all year long, mortgage rates haven’t broken above 7% yet. This is because of better mortgage spreads. Housing demand doesn’t do well when mortgage rates are above 7%, so hug a mortgage spread.

Historically, mortgage spreads have ranged from 1.60% to 1.80%. Last week, spreads were at 2%, up from 1.94% 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 7.98% today, not 6.81%.
• If we had the worst levels of 2024, mortgage rates would be 7.60% today. 
• If we had the worst levels of 2025, mortgage rates would be 7.41% today.

The second variable

The other variable that has helped housing this year is that in the past two years, wages have outpaced home-price growth. Even though national nominal home prices haven’t fallen, they’re not growing much: 1%-2% last year and the same this year. Parts of the country are up more than that, and parts are down. However, this has helped with housing affordability.

Just imagine if home prices had grown 3% in 2020 and 2021 instead of 10% and 19%; we would have had better affordability. If home prices were growing faster than wage growth, I wouldn’t be able to say that the market is healthier. 

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%

With the Iran conflict 2.0 escalating and a more hawkish Fed, the 10-year yield is above 4.60% and mortgage rates are above 6.75%. The bond market really doesn’t like this conflict with Iran. I wrote here about why it’s hard to get mortgage rates over 7%, and I have said on many podcasts that even if the conflict gets worse, I can only add 0.375%-0.43% to my forecast of 6.75%. We are now testing this theory, as we are now up 0.08% with mortgage rates at 6.83%.

If you’re looking for stability and lower rates, this conflict with Iran has to come to an end first, as the hawkish Fed members are not happy with this situation.

Weekly pending sales

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

First, the housing market is slowing down, just not by a lot. We did show year-over-year growth last week, but that growth is getting smaller. The year-over-year comps will get a bit harder for the rest of this year, as rates were falling at this time last year. Take that and higher rates into consideration for the rest of the year if we stay above 6.64%. 

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

• 2026: 69,109
• 2025: 68,413

Total pending sales

Our total sales are more of a moving average; our weekly pending home sales data will get ahead of this data, but for 2026, we are still showing growth here. Higher rates have cooled this off and should do that more if rates stay elevated.

• 2026: 396,572
• 2025: 386,561

Mortgage purchase application data

Purchase application data, which looks out 30-90 days, showed some weakness last week, being down 4% week to week and up only 3% year over year. Our year-over-year growth numbers were better when rates were lower, of course, and remember that the comps here will get harder not only going out the rest of the year but also into 2027, as most of this year has had year-over-year growth.

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

• 12 positive week-to-week prints
• 15 negative week-to-week prints
• 2 flat week-to-week prints
• 10 weeks of double-digit year-over-year growth
• 25 weeks of positive year-over-year growth
• 3 negative year-over-year prints

Housing inventory

Housing inventory has slowed a lot since mid-June 2025, but recently, as rates have gone higher, inventory growth has picked up a tad; the year-over-year growth stands at 0.85%. However, after mid-June 2026, it’s also much easier for the year-over-year comps to show growth.

Traditionally, when rates are lower and mortgage demand picks up, it’s harder to grow inventory. Inventory in the U.S. hit a record low in March of 2022; now we are closer back to normal, which for our data is over 1 million active listings during the seasonal peak months.

• Weekly inventory change ( July 24-July 31): Inventory rose from 865,233 to 872,932
• Same week last year (July 25-Aug. 1): Inventory rose from 860,407 to 865,600

New listings

The seasonal decline in new listings has arrived. Traditionally, there would be 80,000-100,000 new listings during the seasonal peak weeks, but we’ve only cracked above 80,000 four times this year and never in back-to-back weeks.  Still, new listings are much healthier now than what we saw in 2023. Remember, most sellers are homebuyers, so getting back to normal is a good thing

Some context for those who believe that the new listings data resembles the housing bubble years: new listings during that time 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: 72,556
• 2025:  69,836

Price-cut percentage

Typically, about one-third of homes undergo price reductions before they sell, reflecting the dynamic nature of the housing market. For the most part, price-cut percentages this year have been lower than last year. Now, as mortgage rates have risen versus last year, I do expect the year-over-year decline to compress and eventually become at par or go higher versus last year if rates keep heading higher. 

In my 2026 home-price forecast, I had a negative 0.62% call for the year nationally. Home-price growth really isn’t going anywhere this year, but the percentage of price cuts has been lower year over year for most of 2026. My forecast of negative -0.62% might be hard to achieve, as most of the home price indexes are showing price growth between 1% and 2%. However, with rates rising again, I might be right in 2026. 

The price-cut percentage for last week:

• 2026: 40.97%
• 2025: 42%

The week ahead: Iran conflict and jobs week

What a week to have jobs week as we are seeing indicators of a bigger escalation of the Iran conflict! The bond market initially didn’t care much about the conflict, but now that we are in August, it trades very poorly on negative news about the conflict and the inflation implications, because the hawkish Fed members have deep concerns about the conflict. 

It’s jobs week too, and yes, the labor data still matters, but now we get to see how much versus a very hawkish Federal Reserve and a conflict that is heading into the six-month mark. We will have more Fed speeches this week and they all matter because the hawks only need four more votes to get their rate hike in September.