Slowing inflation could complicate rate cut decisions 

Analysts woke up to an unexpected development today as the year's final inflation reading beat forecasts — good news for consumers, but another wrinkle for the Federal Reserve as it considers rate cuts in 2026.

Core inflation, which excludes the volatile food and energy sectors, came in at 2.6% — well below predictions of 3%, the level seen in September when CPI data was last released. 

The not so good news? Pending home sales fell nearly 6%, according to Redfin, taking the biggest dive of the year. 

Inflation down — but is the data reliable?

The October CPI report was skipped due to the government shutdown, and the November data, originally due for release on Dec. 10, was delayed. The shutdown also impacted data collection, meaning today's figure is based on incomplete information. That "complicates interpretation," said First American Sr. Economist Sam Williamson, and "may understate the true pace of inflation." 

Analysts generally appear to be taking the data with a grain of salt, with NAHB Sr. Economist Fan-Yu Kuo suggesting that December's report — which will be released ahead of the central bank's next meeting — "may be more pivotal for markets and the Fed."

Still, the November reading puts core inflation "at its lowest level since March 2021, just as this week's labor market data showed unemployment rising to its highest level since 2021," Realtor.com Sr. Economist Jake Krimmel noted — causing a push-pull situation for the Fed as it weighs monetary policy decisions next year.

Mortgage rates still too high for buyers

While mortgage rates dipped slightly to 6.21% this week and remain near the lowest levels of the year, according to Freddie Mac, that hasn't appeared to spur demand. 

Pending sales declined by 5.8% for the four-week period ending Dec. 14, according to Redfin data. That's due in part to affordability issues and economic uncertainty — but the report also noted that contract signings were higher than usual at this time last year, leading to a bigger year-over-year gap.

"Mortgage rates are buyers' biggest concern," Redfin Premier agent Tracy Edwards said in the report. "They want to make sure they're not paying too much every month."

That's showing up in mortgage applications, which fell 3% for the week ending Dec. 12, and it's affecting sellers too: The pace of new listings was the slowest of the year, Redfin found.

Improving affordability in 2026?

Two other reports released today suggest buyers may have an easier time finding a home that fits their budget in the coming year. 

Zillow noted that home price growth was nearly flat by the end of 2025 and monthly mortgage payments had eased. The share of median household income needed to pay a typical mortgage fell by about three percentage points from the beginning of the year, according to Zillow, dropping to the lowest level since August 2022. 

First American also reported stabilizing home prices, pegging the annual growth rate at less than 1% in November. "Slower price growth offers buyers a bit of affordability breathing room in the near term, and with wage growth exceeding house price growth, affordability is poised to continue slowly improving," said Mark Fleming, chief economist at First American.

That outlook is consistent with other economists' predictions of limited price growth in 2026, which could give buyers a better shot at a home purchase in the new year.