The real estate market is closely tied to broader economic trends, and the latest data offers both opportunities and challenges for home buyers and sellers. With mortgage rates trending slightly lower, housing permits and sales showing mixed signals, and prices softening, now is a key moment to understand where the market may be heading.
Housing Supply and Sales
In July, building permits came in at 1,362,000, representing a 2.2% month-over-month decline. While this was a dip, the figure still exceeded expectations—suggesting that builders remain active despite higher costs and economic uncertainty. More permits today mean more supply in the future, which could gradually ease the inventory squeeze.
Meanwhile, new home sales slipped just 0.6% month-over-month in July but still came in above forecasts. This indicates that demand for new construction remains steady, supported in part by buyers who are struggling to find options in the resale market.
Home Prices Show Signs of Cooling
After several years of steep growth, home prices are showing modest signs of relief. The FHFA House Price Index fell 0.2% in June, though values remain 2.6% higher compared to last year. Similarly, the seasonally adjusted 20-city Case-Shiller Index declined 0.3% month-over-month in June. For buyers, these dips may signal the beginning of more favorable pricing, while sellers should be prepared for a more competitive environment where realistic pricing and strong marketing strategies are essential.
Mortgage Activity and Affordability
Despite slightly lower mortgage rates, overall mortgage application submissions fell 0.5% in the week ending August 22. Breaking this down, the Refinance Index decreased 4% from the week before, though it remained 19% higher than a year ago, showing that some homeowners are still capitalizing on improved rate conditions. On the other hand, the Purchase Index rose 2% from the previous week, a positive sign that buyers remain engaged.
Even small changes in mortgage rates can significantly impact affordability. For example, a quarter-point drop in rates may not seem like much, but it can translate into meaningful monthly savings—enough to keep some buyers in the game.
Labor Market and Economic Strength
A resilient labor market continues to support housing demand. Continuing jobless claims dropped to 1,954,000 for the week ending August 16, a decline of 7,000, while initial jobless claims fell to 229,000 for the week ending August 23, down 5,000. Strong employment numbers give households more confidence to buy or upgrade homes.
The broader economy also looks steady. The Q2 GDP estimate increased by 3.3%, reflecting strong growth. Pending home sales dipped 0.4% in July, in line with expectations, suggesting steady but cautious momentum. Inflation also remains manageable, with the core PCE index holding at 0.3% in July. Meanwhile, personal income rose 0.4% and consumer spending increased 0.5%, both meeting expectations and pointing to balanced household financial health.
What It Means for Buyers and Sellers
For buyers, slightly lower mortgage rates, coupled with modestly declining home prices, create opportunities—particularly if more inventory comes online. Acting before demand strengthens further could help secure a better deal.
For sellers, the market remains active, but buyers are more selective. Pricing competitively and presenting homes well are critical to standing out.
Overall, the housing market appears to be stabilizing, with economic strength offsetting affordability challenges. Buyers and sellers who stay informed and adaptable will be best positioned to take advantage of the shifting landscape.
