Editor’s note: Econ Review is a roundup of the housing and economic market data reports released during the month.
As the first half of 2026 has come to a close, the larger expectations for the housing market may not necessarily have been met, but optimism remains.
2026 was originally expected to be a year of normalization for the housing market, but headwinds like the Iran War put a wrench into those expectations. However, the theme of the year so far has been one of “resilience” and “cautious optimism” as indicators have been historically bettering, even if they are still diminished.
Reports from July followed the same trend, with hopes for the rest of the year shaping up the same way.
Here are some highlights from the housing and economic data that hit the news in July:
Home sales
Existing-home sales saw some strong reports this past spring, with May’s data hitting the “highest level since December,” as characterized at the time by NAR Chief Economist Lawrence Yun.
June’s numbers (reported in July) unfortunately saw a reversal, with sales falling 2.4% to 4.09 million (down from 4.19 million). While this was lower than expectations, despair was not the message of the report. Sales were still up 2.8% year-over-year, and other indicators still had positive highlights—namely in inventory and affordability.
Inventory in the report was up 1.3% year-over-year, and NAR’s Housing Affordability Index improved from a rating of 95.5 a year ago to 102.3 in June (and was up across all four regions), indicating more affordability in home buying.
New-home sales have been facing an additional set of challenges as of late, due to continued headwinds in the construction industry. July’s report was down 5.6% year-over-year.
“Builders are facing a challenging set of circumstances as their costs continue to rise at the same time that competition from the existing home sector grows and buyer confidence wanes,” said Joel Berner, senior economist at Realtor.com®.
However, July’s New Home Sales report had positive indicators, starting with a slight month-over-month bump to the tune of 1.6%. Additionally, the median sales price of new homes dropped 3.3% month-over-month and 2.7% year-over-year to $398,300. The average sales price also dropped 9.5% month-over-month and 6.5% year-over-year to $475,400. Both were much needed improvements in affordability for new homes.
As for potential incoming activity, Pending Home Sales unfortunately dipped 5.4% month-over-month in July’s report. However, the year-over-year gap was very narrow at only 0.3%.
Yun said that the one-two punch of elevated mortgage rates and home prices do remain barriers to bigger increases in activity, but he noted that continued growth in the labor market will “help support housing demand.”
Home prices
Elevated inflation and mortgage rates started to exert some upward pressure on home prices once again in July’s Case-Shiller report, but the overall growth still remains “noticeably weaker,” as characterized by Rebecca Kaufman, associate director of Commodities at S&P Dow Jones Indices.
Home prices grew 1.1% year-over-year in the report, and while up from the 0.9% seen the month before, this growth rate was still down from the 2.4% seen at the same time last year.
The regional home price picture remains more mixed—as it has across most reports in the housing market. Bright MLS Chief Economist Lisa Sturtevant characterized the differing trends as “a tale of two (or maybe three) markets.”
The 10- and 20-City Composites saw accelerated growth year-over-year from previous months, but actual month-over-month growth was still relatively small.
The expectation for months ahead remained one of “cautious optimism” toward continued improvement in affordability, even as the Iranian conflict persists.
Housing construction
As previously mentioned, housing construction has faced a specific set of headwinds—namely tariffs and supply chain issues—that have diminished activity in single-family homebuilding (and raised the price of the homes that are built). July’s New Residential construction report showed evidence of these adversities.
While housing starts did report a jump in activity—up 19% month-over-month and 3.5% year-over-year—this was mostly due to an increase in multifamily starts and not in the much needed single-family sector. Multifamily starts jumped a notable 80% month-over-month, while single-family starts slipped 0.2% month-over-month and 3.2% year-over-year.
Building permits were down both monthly and annually in July’s report, and fell in both the multifamily and single-family sectors—a sign that activity will most likely stay diminished in the next report.
As housing construction remains challenging, homebuilder confidence has been on the highly negative end of the scale. July’s report specifically hit a “new low” as it remained below the 50-point breakeven mark for the 15th straight month.
However, hope lingers on the horizon in the form of the recently passed 21st Century ROAD to Housing Act, which National Association of Home Builders Chairman Bill Owens said is a step in the right direction as it “contains important provisions on land-use and zoning, regulatory reform and financing tools that address obstacles facing builders and buyers.”
The overall economy
The outlook on the economy kicked off with a jobs report that came in lower than expectations, but not a complete sign of despair. Only 57,000 jobs were added in June, compared to 129,000 the month before. The unemployment rate was mostly flat, however, due to a higher rate of job hunting.
Those numbers were subsequently revised downward, however, and the economy actually lost jobs in July—a net loss of 23,000 from the previous month.
Jake Krimmel, senior economist at Realtor.com, said that the labor market “isn’t providing much of a tailwind for housing demand,” but it also “isn’t a headwind either.”
“Continuity in job growth is no small thing, especially against the volatile backdrop of rates, inflation and uncertainty we saw earlier this spring,” he continued.
Speaking of inflation, both the CPI and the PCE indexes observed a much needed decrease in inflation.
The July CPI fell 0.4% month-over-month, setting annual inflation at 3.5% (down from 4.2% the month prior). The core CPI was flat month-over-month, with annual core inflation at 2.6% (down from 2.9%).
“(This) data, combined with the drop in Treasury yields, may point toward some relief rather than the renewed instability the market had been bracing for. That matters heading into the traditionally slower but still-active late-summer buying season,” Krimmel said.
The July PCE fell 0.1% month-over-month, with annual inflation falling to a two-month low at 3.7%—also down from the 4.1% peak in May.
The core PCE index grew 0.1% month-over-month, with annual core inflation at 3.3% (down from 3.4% last month).
In both reports, gas and energy inflation saw large drops of 9% or more, largely contributing to the lower inflation.
With all the indicators on the table, the Federal Reserve once again decided to maintain the “wait-and-see” approach, and held interest rates steady for another month.
New Federal Open Market Committee Chair Kevin Warsh said that he wouldn’t characterize the steady stance this month as a “pause,” but as a “rigorous review of the economic situation…and the big hard questions…and to try to resolve those questions in the period ahead.”
Despite lowering inflation, consumer confidence and sentiment both remained on the more mixed front.
Consumer Confidence saw a decrease in July’s report, coming in below expectations as consumers remain cautious while the Iranian conflict persists. However, the survey did identify that expectations for bigger purchases (namely homes and autos) are up on a six-month rolling average, seemingly demonstrating that demand for homes is defying broader pessimism about the economy.
Consumer Sentiment had a slightly more positive outlook, seeing an increase of 12%, jumping above 50 points (to 55.2). Sentiment does still remain lower year-over-year by 11%, but year-ahead inflation expectations did slightly tick down.
Looking ahead, the Leading Economic Indicators report for July saw a slight decline of 0.2% to 99.1, only a hair below the 100 mark that represents conditions from 2016 and well above the red line that would signal an economic recession.
“Despite the recent decline, the LEI’s six- and twelve-month growth rates, while negative, were stable,” noted Justyna Zabinska-La Monica, the Conference Board’s senior manager of Business Cycle Indicators. “Consumer spending is weakening, but strong business investment related to AI is expected to support economic activity while inflation continues to improve.”
