‘Worst of the pain’ may be over for stalled housing market
Though pending home sales continue to stay ahead of last year’s pace, elevated rates and rising inflation are sapping momentum heading into the summer months.
Key points:
- The 30-year fixed-rate mortgage increased slightly week-over-week to 6.49%. Rates have hovered around the 6.5% level for the past six weeks.
- Though mortgage rates are currently sticky, inflation continues pressuring consumers, with the latest data indicating core inflation is running at a three-year high.
- Upticks in mortgage applications and pending sales indicate some consumer demand is out there, raising hope for a slightly better summer for home sales than 2025.
The housing market appears to be settling into a groove where consumer activity is not awesome — but not horrible — heading into the summer.
The 30-year mortgage rate continues to hover around 6.5%. Economists say it could drift down if the war in the Middle East concludes or climb further if energy prices drop but inflation persists. Meanwhile, existing home pending sales are a little better than last year, but new home activity has slowed — and new listings are also stalling as Americans turn their attention to summer vacations.
"This year's Iran war spiked interest rates and has certainly cost us some momentum, but the worst of the pain was back in March. We have a slightly more optimistic second quarter peak homebuying season in 2026 than in 2025," Compass Chief Economist Mike Simonsen said in a weekly update.
Inflation remains a problem
Inflation continues bringing headwinds to the market that could keep demand in check. Personal consumption expenditures — one of the inflation indexes that the Federal Reserve watches closely — increased 4.1% year-over-year in May, according to the U.S. Bureau of Economic Analysis. When the more volatile food and energy costs were stripped out, core inflation was up 3.4% — the highest since 2023.
"While the war does appear to be winding down, neither rates nor inflation are following suit," said Jake Krimmel, senior economist at Realtor.com. "Unfortunately both inflation and mortgage rates appear to be staying higher for longer."
Rates hold steady
The 30-year fixed-rate mortgage has been relatively stable over the past six weeks and started trending down in recent days, according to Mortgage News Daily. Rates averaged 6.49% as of June 25, up slightly from 6.47% a week ago, according to Freddie Mac, which uses a different set of metrics in gauging rates. A year ago, the rate was around 6.77%.
The year-over-year difference may be just enough to avoid the housing market slowdown that took place last summer, Krimmel suggested.
Applications up year-over-year
The latest mortgage application data also implies the possibility of a better summer for home sales. Overall weekly applications increased 1% for the week ending June 19, mostly boosted by refinancing bids, according to the Mortgage Bankers Association (MBA).
"Despite the elevated mortgage rates and overall economic uncertainty, mortgage application volume is running 8% above year-ago levels," noted Mike Fratantoni, MBA's SVP and chief economist.
Buyers have fewer choices
Other housing market data paints a less rosy picture. For the week ending June 21, new home listings dropped 1.7% compared to the week before, falling to the lowest level in four months, according to Redfin. And while pending sales data has improved compared to this time last year, this segment has been trending down in recent weeks, prompting homesellers to back off for now.
Even with the slowdown in new listings, sellers still outnumber buyers, giving home shoppers some leverage when the time comes to negotiate. Nearly half of sellers gave concessions to buyers last month — the highest share on record for the month of May, according to Redfin data.
"There are two main reasons concessions are so prevalent: Buyers have leverage, and some sellers are pricing too high," said Amanda Peterson, a Redfin Premier agent in Dallas. "Some sellers are stuck in the mindset of the 2021 market, when they had the leverage; those sellers are often pricing too high, making concessions even more necessary to close a deal."