Editor’s note: Econ Review is a roundup of the housing and economic market data reports released during the month.
Summer 2026 did not pick up speed as the industry had originally hoped when the year began, largely due to elevated inflation from the Iran war. However, some positive signs for the housing market might still be bubbling below the surface.
As the season begins to wind down and real estate moves into a typically more muted fall and winter, the question on many economists’ and real estate professionals’ minds is whether this is part of normal seasonality—or if economic challenges are causing a larger issue for the industry.
Home sales
Any summer-based increases in demand are set to slow down as the season starts to wrap up.
The latest existing-home sales data saw a 1.7% drop month-over-month, with the National Association of Realtors® (NAR) reporting a 0.7% year-over-year increase.
NAR Chief Economist Lawrence Yun did note that “Year-to-date sales are up 2.4%,” adding that there’s “no doubt that the housing market would be thriving if average mortgage rates were to return near 6%.”
On the topic of mortgage rates, Bright MLS Chief Economist Lisa Sturtevant said that “forward-looking indicators suggest a late summer market slowdown ahead” due to rates going back on the rise.
The latest new-home sales data showed affordability issues in housing construction, as builders also saw sales slip.
New-home sales tumbled a notable 10.5% month-over-month and 6.3% year-over-year.
Economists also called out mortgage rates as a challenge to the new homes market. As NewHomeSource and Zonda Chief Economist Ali Wolf noted: “More than half of major markets underperformed their historical average, with mortgage rates keeping payment-sensitive buyers on the sidelines.”
“Consumers still want to buy homes, but uncertainty is making them more cautious,” she added.
Looking at potential activity when it comes to next month, the end of summer is expected to put a damper on the market as the latest pending home sales data dipped 2.3% month-over-month and 2.2% year-over-year. This was a drop to the lowest level of activity since January 2026.
Realtor.com® Senior Economist Hannah Jones noted that the late summer market will “likely continue its seasonal drift.”
“Inventory tends to build and price cuts become more common as attention turns toward the school year, which could create real opportunity for buyers still active in the market, particularly if rates find some relief,” she continued.
Home prices
Home-price growth slipped for the 13th consecutive month as affordability continues to see marginal improvement. The latest Case-Shiller report saw a 1.5% annual gain, up 0.4% month-over-month. This was a slight acceleration from last month’s 1.1% annual gain, but is still down from the growth rate at the same time last year.
While Case-Shiller lags a few months behind other industry reports, it is still valuable for tracking home-price growth, which has shown a consistent downward trend.
“The modest acceleration in home prices seen in May may be harder to sustain into the back half of summer,” said Realtor.com Senior Economist Anthony Smith. “Even so, real home values have now declined for 12 consecutive months, with May’s 4.2% inflation running roughly three percentage points ahead of nominal price growth, keeping the market’s underlying softness intact even as headline year-over-year figures tick higher.”
NAR’s affordability index also increased in all four regions: Up 7.3% in the West, 6.1% in the South, 4% in the Midwest and 1.5% in the Northeast.
Looking at home prices directly, the median existing home price was up 2% year-over-year to $434,100 as the inventory on the market slipped. Existing inventory fell 1.9% month-over-month and 0.6% year-over-year.
At the same time, though, the median new home price actually saw a dip of 2.3% month-over-month and 0.9% year-over-year to $393,800. This was probably due to a 1.9% monthly increase in inventory, as well as a 12.9% monthly and 4.3% yearly increase in supply.
Housing construction
The aforementioned challenges facing the housing construction industry did not waiver in August’s New Residential Construction report.
Housing starts caved 12.4% month-over-month and 13.5% year-over-year, with both multifamily and single-family construction down. Three of the four census regions all observed decreases as well. The only outlier was the Northeast, which was up 17.1% month-over-month due to a rise in multifamily starts for the region.
Housing completions were also troubled again, down 9.1% month-over-month and tanking 16.8% year-over-year.
A bright spot in the report showed permits rising 5% month-over-month, “the highest pace since February,” as noted by Smith.
However, Sturtevant warned that “permits don’t always translate into starts…and builders and developers will be responding to economic conditions as we head into fall.”
With the industry remaining in a tough spot, homebuilder confidence was once again in the negative territory in the latest National Association of Home Builders (NAHB) report.
Builder confidence was essentially flat, only moving up one point to 35, remaining under the 50-point breakeven mark. NAHB Chief Economist Robert Dietz noted that this was the “16th consecutive month with the HMI below 40.”
“Rising gas and diesel prices are pushing up material costs, and spec home building remains weak as many prospective buyers stay on the sidelines,” added NAHB Chairman Bill Owens.
The overall economy
The economic signals in August once again presented a complicated picture, as elevated inflation due to the continued conflict in the Middle East persists.
While the Federal Reserve neglected to shift rates again at its July meeting, the notes from said meeting did indicate that a rate hike does remain on the table. In fact, a rate hike was proposed in July, but was outvoted 9-3.
What was characterized last month as a “resilient” labor market unfortunately bowed under some pressure in the latest jobs report, seeing a fall of 23,000 jobs.
Despite this turn of events, Realtor.com Senior Economist Jake Krimmel said he did not see the labor market deceleration as a meaningful factor for the Fed right now.
“Pending sales continued to beat last year’s pace (though that lead is narrowing), and homes spent a day less on market than they did a year ago,” he said. “Friday’s messy jobs print doesn’t change that story, but it does underscore that labor market momentum, on average, isn’t providing any outsized added support to housing demand right now.”
Krimmel also noted that inflation reports would help give a better picture of the Fed’s path forward in September.
Speaking of inflation, the Consumer Price Index (CPI) observed a slight increase of 0.1% in its latest report, bringing annual inflation to 3.4%.
Core inflation also increased, up 0.2% month-over-month, bringing annual core inflation to 2.5%.
Sturtevant noted in the report that “inflation is moving further away from the Fed’s 2% target, and this increase has at least two implications for the housing market.”
“First, it is harder to see a path forward for the Fed to lower interest rates if inflation remains above that target. Labor market conditions have softened, which complicates the decision, but inflation is still the primary concern for the Fed,” she continued. “A rate hike could be just as likely as a rate cut this year.”
The PCE price index also saw an increase, bumping up 0.2% to bring annual inflation to 3.7%.
Core inflation in the PCE was also up by 0.2%, clocking annual core inflation at 3.3%.
Steve Hanke, a John Hopkins professor of applied economics, described the consistently elevated state of inflation as of late as “the genie the Fed just can’t put back in the bottle,” on social media.
As the economy continues to face hardships, so do consumers, depleting morale for another month.
Consumer confidence saw only a minor fall of 0.8 points to 89.4, but inched ever so slightly further away from the 100-point breakeven mark.
On a positive note, the Present Situation Index did see a 6.8 point jump to 121.2, breaking a three-month downward trend and showcasing a small amount of positivity from consumers. The outlook moving forward, though, remains muted, as the Expectations Index dipped 5.8 points to 68.2.
Mohamed El-Erian, an economics professor of practice at UPenn and former president of Queens’ College, Cambridge, called the survey results “a miss” on social media, saying the data is “raising the stakes” for the next University of Michigan survey.
Consumer sentiment saw an even larger dip than consumer confidence, slipping 3.5 points to 51.7.
Surveys of Consumers Director Joanne Hsu noted that declines were “seen for all political groups and were particularly acute among Republicans.”
“With ongoing policy uncertainty including the Iran conflict, consumers anticipate further increases in gasoline prices both in the short and long run,” added Hsu. “In addition to the pocketbook issues that have been central to consumers’ views of the economy, they are increasingly worried that prospects elsewhere in the economy could be weakening.”
Looking ahead, the Leading Economic Index again did not signal a recession in the near future.
The index increased by 0.2% month-over-month, bringing it to 99.5. Justyna Zabinska-La Monica—the Conference Board’s senior manager of business cycle indicators—noted that “most components were positive in July except consumer expectations, which continued to be a notable drag on the overall index.”
Zabinska-La Monica outlined further economic expansion in the coming months due to AI, but also noted that the “higher cost of living may reduce consumer spending, especially by lower- and middle-income households.”
