Week of January 12, 2026 | Market Review

Inflation data came in exactly as expected to close out 2025, while lower mortgage rates continued to bring buyers back into the market. Existing home sales just hit their strongest level in nearly three years, and new home demand remains resilient despite ongoing supply constraints.

Here’s what matters and why it matters heading into the heart of winter.

Inflation Meets Expectations — Giving the Fed Room to Stay Patient

Consumer prices rose 0.3% in December and 2.7% year-over-year, unchanged from the prior report. Core inflation (excluding food and energy) increased 0.2% for the month and held at 2.6% annually, its lowest level since early 2021.

Shelter costs remain the biggest contributor to inflation, accounting for roughly 35% of headline CPI and 44% of core CPI. Even modest changes in housing costs can meaningfully move the overall inflation picture, and shelter prices edged slightly higher in December.

Bottom line: Inflation isn’t accelerating — but it isn’t gone either. That keeps the Federal Reserve in “wait and watch” mode. While inflation argues for caution, softer labor data gives the Fed flexibility. The Fed has already cut rates three times, and future moves will hinge on whether inflation continues cooling without a major labor slowdown.

Mortgage rates aren’t set by the Fed directly — but this environment supports stability rather than sharp spikes.

Existing Home Sales Surge to a 3-Year High

Existing home closings jumped 5.1% in December, marking the fourth straight monthly increase, according to the National Association of REALTORS®. Sales were also 1.4% higher than a year ago.

Inventory dropped sharply month-over-month to 1.18 million homes, though it remains modestly higher than last year.

Bottom line: This is the clearest signal yet that buyers are responding to lower rates and slowing price growth. As NAR's Lawrence Yun noted, sales are now at their strongest level in nearly three years — and this momentum is building before the traditional spring season even begins.

For agents, that means buyer activity may pick up faster than expected once inventory seasonally improves.

New Home Sales Stay Strong — But Finished Inventory Is Still Tight

New home sales dipped just 0.1% to an annualized pace of 737,000 units, remaining near the fastest level since mid-2023. These sales reflect contracts signed during periods when mortgage rates were easing.

However, supply remains the challenge.

Of the 488,000 new homes available, only 122,000 are completed and move-in ready. Most inventory is still under construction or not yet started, highlighting how difficult it is to quickly increase supply.

Bottom line: Builders can’t flip a switch on inventory. Permits, construction timelines, and labor constraints all slow delivery. If mortgage rates trend lower while supply remains limited, price pressure could return — even without a booming economy.

Other Economic Signals Worth Watching

• Labor market: Jobless claims remain low, reinforcing a “low-fire, low-hire” environment.
• Wholesale inflation: Producer prices rose modestly, driven largely by energy. Core prices stayed flat.
• Retail sales: November sales surprised to the upside, signaling consumers ended 2025 on stable footing.

None of these reports change the trend — but together they support a slower, steadier economy rather than a sharp downturn.

Family Hack of the Week 🍫

Celebrating National Blonde Brownie Day on January 22? Chocolate Chunk Blondies are an easy crowd-pleaser and a great winter bake.

What to Watch This Week

• Pending Home Sales (Wednesday)
• Jobless Claims + delayed PCE inflation data (Thursday)
• Final Q3 GDP reading

These reports will help shape expectations for early-2026 rate movement.

Technical Picture (For the Rate Watchers)

Mortgage bonds slipped below key support late last week, while the 10-year Treasury moved above the 4.20% level, putting upward pressure on rates short-term. Volatility is likely as markets digest delayed inflation and growth data.

Big Picture Takeaway

Lower rates are already working — buyers are responding. Inventory remains constrained. Inflation is cooling, but not collapsing.

That mix favors prepared buyers and proactive agents heading into the spring market.