Week of July 13, 2026 June brought some welcome inflation news, while housing market updates were mixed. Construction activity rebounded, but home sales declined.
Here are the key takeaways
Inflation comes in Below Expectations
June brought encouraging inflation news, with both consumer and wholesale prices coming in lower than expected. Consumer prices fell 0.4% for the month, helped by a nearly 10% drop in gasoline prices, while annual inflation slowed to 3.5%.
Core inflation, which excludes food and energy, was unchanged from May and rose 2.6% over the past year.
Wholesale prices also declined from May to June, helped by lower energy costs.
What’s the bottom line?
Cooler-than-expected inflation reduces pressure on the Federal Reserve to raise its benchmark Fed Funds Rate. While the Fed doesn't directly set mortgage rates, its policy decisions influence borrowing costs across the economy.
After cutting rates three times late last year, the Fed has kept its benchmark rate unchanged throughout 2026, and policymakers are widely expected to remain on pause later this month.
The Fed’s dual mandate is to maintain price stability while supporting a healthy labor market. It will continue monitoring inflation trends, labor market conditions, and geopolitical developments in the Middle East as it evaluates future policy decisions.
New Home Construction Rebounds, but Headwinds Remain
Housing starts rebounded in June, rising 19% after dropping to a six-year low in May. The May decline appears to have been an outlier, with June’s rebound coming in above expectations. Housing starts measure new homes that have broken ground and begun construction, and the annual pace reached 1.43 million units.
Building permits, which provide insight into future construction activity, declined 3% from May to an annual pace of 1.37 million units.
Despite the rebound in starts, builders remain cautious. The National Association of Home Builders’ Housing Market Index fell two points in July to 34. A reading below 50 means more builders view market conditions as poor rather than good. Affordability challenges, elevated mortgage rates, and higher construction costs continue to weigh on builder confidence.
What’s the bottom line?
More housing supply is needed to help meet buyer demand, but building new homes takes time. Builders must navigate permitting, construction, and completion before new inventory reaches the market. If mortgage rates move lower and buyer demand strengthens, limited inventory could continue to provide support for home prices in the months ahead.
Pending Home Sales Slow in June
Pending home sales, which track signed contracts on existing homes, declined 5.4% from May to June, ending a four-month streak of gains. Sales fell across all four regions and were 0.3% lower compared to the same time last year.
What’s the bottom line?
Recent ups and downs in home sales show how sensitive buyers remain to changes in mortgage rates and affordability. Higher rates in recent months have weighed on demand, but a decline in rates could help improve affordability and encourage more buyers to re-enter the market.
Quick Look: Consumer Spending and Unemployment
Retail sales increased 0.2% in June, in line with expectations. Lower gas prices led to a decline in gas station sales, which pulled down the overall figure. However, excluding gasoline purchases, sales rose a stronger 0.7%, showing that consumer activity remains resilient.
The labor market continues to show mixed signals. New unemployment claims remain relatively low at around 208,000, 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 1.81 million, suggesting it is taking longer for some job seekers to find new employment.
What to Watch Ahead
It's a quieter week for economic news, with Thursday’s jobless claims report and Friday’s June New Home Sales data serving as the key highlights
All data and analysis provided by MBS Highway.
Call, text, or DM me to continue the dialogue.
Mike Nelson, CEO - Efficient Lending, Inc 720.419.3016 | mike@efficientlending.net |
