Week of August 10, 2026 in Review There was some welcome news on inflation, while the housing market saw slower sales in July but continued price strength this spring. Here’s what you need to know. Inflation
Data Shows Encouraging Signs
July brought positive inflation news, with both consumer and wholesale prices coming in at or below expectations.
The CPI report showed consumer prices rising just 0.1% in July, bringing annual inflation down to 3.4%. Gasoline prices did rise during the month, but the average price was still lower than in June, which helped keep overall inflation in check.
Core inflation, which excludes food and energy, rose 0.2% from June and slowed to 2.5% over the past year.
Wholesale prices were also more subdued than expected, coming in essentially flat for the month. On an annual basis, both headline and core wholesale inflation moved lower.
Bottom line:
Core CPI inflation is now at its lowest annual rate since March 2021, matching the level we saw in February. Looking at the most recent three months – May, June, and July – and annualizing that pace, inflation is running at about 1.6%. Three months is a relatively short period, but the recent trend is encouraging and currently below the Federal Reserve’s 2% inflation target.
Cooler inflation eases pressure on the Federal Reserve to raise its benchmark Fed Funds Rate. While the Fed does not directly set mortgage rates, its decisions influence borrowing costs across the economy.
This is particularly notable because some Fed officials who favored a rate hike at the July meeting pointed to inflation that was still too high and a strengthening labor market. Since then, the July jobs report showed job losses and other signs of labor sector weakness, while these latest inflation reports came in cooler than expected.
The Fed’s dual mandate is to maintain price stability while supporting a healthy labor market. As it considers future policy decisions, it will continue watching inflation, employment, and geopolitical developments, including events in the Middle East.
Existing Home Sales Slow in July
Existing home sales fell 1.7% from June to July, marking the second consecutive monthly decline and bringing the seasonally adjusted annual rate to 4.06 million homes. Still, sales were 0.7% higher than last year. Inventory also dipped 1.9% from June.
Bottom line:
Despite the summer slowdown, NAR Chief Economist Lawrence Yun said, “Home sales have been remarkably stable, even amid the rising mortgage rate environment of the past few months.” He noted that sales are up 2.4% so far this year and suggested the market could gain significant momentum if mortgage rates move closer to 6%.
Home Values Show Continued Strength
Home prices increased 0.3% from May to June and are now 1.2% higher than they were a year ago, according to Cotality’s latest Home Price Insights report.
Bottom line:
Home prices also showed a strong seasonal increase this spring, rising 1.7% from March through June. If that four-month pace were sustained over a full year, it would equate to about 5.1% annual appreciation.
For homeowners and prospective buyers alike, home appreciation is an important part of the long-term financial benefits of homeownership. For example, a $500,000 home that appreciates 5% would gain about $25,000 in value. Over time, that growth can contribute meaningfully to a homeowner’s overall wealth.
In Focus:
Consumer Spending and Unemployment Claims: Retail sales fell 0.6% in July, missing expectations. Lower gas prices contributed to a decline in gas station sales, which weighed on the overall number. Online retail sales also fell in June, likely reflecting a pullback after June’s Prime Day sales. Even looking at the past two months together, online sales are down 1.3%, which could be an early sign that consumers are becoming more cautious with their spending.
Unemployment claims continue to tell the same story this summer. Initial filings remain relatively low at around 209,000, but they may not capture the full picture, as some workers who lose jobs are turning to freelance or gig work rather than filing for benefits. Meanwhile, continuing unemployment claims remain elevated at 1.78 million, suggesting it is taking longer for some job seekers to find new employment.
What to Watch Ahead
Next week features several key housing reports, beginning with homebuilder confidence on Monday. Housing Starts, Building Permits, and Pending Home Sales are scheduled for Tuesday. Investors will also be watching Wednesday's release of the Fed's July meeting minutes and Thursday's weekly jobless claims for insight into the economy.
All data and analysis provided by MBS Highway.
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Mike Nelson, CEO - Efficient Lending, Inc 720.419.3016 | mike@efficientlending.net |
