Inflation Aligns with Analyst Forecasts December’s consumer inflation data came in right on target, with prices rising 0.3% for the month and 2.7% annually. Core inflation—which excludes food and energy—held steady at 2.6%, its lowest since early 2021. Shelter costs remain a significant part of these figures, making up more than a third of the Consumer Price Index. Even small shifts in shelter prices can have an outsized impact on overall inflation.
The Federal Reserve remains cautious, weighing persistent inflation against signs of a cooling labor market. While the Fed cut its benchmark rate three times last fall, mortgage rates are influenced by broader factors. According to Fed Chair Jerome Powell, there is “no risk-free path,” and upcoming decisions will be shaped by both inflation and the job market.
Home Sales Hit Multi-Year Highs. Existing home sales surged in December, rising 5.1% month-over-month and 1.4% year-over-year, according to the National Association of REALTORS®. This marks the fourth consecutive monthly gain and the strongest pace in nearly three years. Inventory remains tight, down 18.1% from the previous month but still up year over year. Lower mortgage rates and slower home price growth have contributed to this momentum, and if these trends continue, buyer demand could stay strong throughout the spring.
New home sales also held near recent highs, with an annualized pace above expectations despite a slight dip from the previous month. However, the supply of completed, move-in-ready homes remains limited, even as the total inventory is among the highest since 2007. Builders continue to face delays in permitting and construction, meaning supply will likely remain tight if demand persists.
Other Economic Highlights The labor market continues to show resilience, with jobless claims trending lower but overall employment growth remaining subdued. Wholesale inflation rose slightly, driven by energy costs, while retail sales posted a healthy rebound in November, signaling consumer strength during the holiday season.
Looking Ahead, this week brings more housing data, including December’s Pending Home Sales report, as well as delayed economic releases such as updated GDP and inflation data. Mortgage bonds and Treasury yields have shifted to new trading ranges, suggesting continued volatility as markets digest new information.
Final Thoughts With inflation stable and home sales gaining momentum, 2026 is off to a promising start for the housing market. Keep an eye on upcoming economic reports to see if these trends hold as we move deeper into the year.
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Mike Nelson, CEO - Efficient Lending, Inc
mike@efficientlending.net | 720.419.3016 | @mike_lending
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