Week Of: 06/29/2026

 06-26-26 11:05am Mortgage markets remained sensitive to energy prices this week. The potential agreement to ease tensions in the Middle East helped push oil prices down to their lowest levels since late February, reducing inflation concerns. Meanwhile, the economic reports revealed no major surprises and had only a modest impact on financial markets. As a result, mortgage rates ended the week a little lower.

Fed officials carefully monitor inflation, and the PCE price index is their favored indicator. As expected, core PCE in May was 3.4% higher than a year ago, up from an annual rate of increase of 3.3% in April and the highest level since October 2023. Progress toward the 2.0% target of the Fed has been challenging, and this level has not been seen since February 2021.

In May, sales of previously owned homes rose 7% from April, exceeding expectations, and were up 7% from a year ago. The median price of $429,300 was up just a slim 1% from last year at this time to a record for the month of May. Inventories remain stuck at low levels, standing at just a 4.5-month supply nationally, well below the roughly 6-month supply typical in a balanced market. However, inventories were a bit higher than a year ago. By contrast, May new home sales, which account for roughly 10% of the market, did not fare as well. They fell 7% from April to the lowest level since January and were 7% lower than a year ago. Unlike existing home sales, which are based on closings, new home sales measure contracts signed during the month.

The latest home building data also contained mixed news. In May, overall housing starts declined 15% from April, more than expected. However, volatile multi-family units plunged a massive 40%, while single-family starts fell just 2%. On a more positive note, single-family building permits, a leading indicator of future construction, climbed a bit higher. A separate survey of home builder sentiment on housing market conditions from the NAHB unexpectedly fell to 35 and has remained in negative territory below 50 for twenty-six straight months. Builders continue to rely on incentives to attract buyers, with 62% offering sales incentives in June and 35% reducing home prices.

Looking ahead, attention will remain fixed on the conflict in the Middle East and the proposed deal to ease tensions. Investors also will monitor comments from Fed officials about future monetary policy. For economic data, JOLTS and Consumer Confidence will be released on Tuesday. The ISM national manufacturing sector index will come out on Wednesday. The key Employment report will be released on Thursday, and these figures on the number of jobs, the unemployment rate, and wage inflation are always closely watched. Mortgage markets will be closed on Friday for July Fourth.

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