New Data: U.S. Home Prices Are Hitting Their Floor

0:00This isn't the housing market anyone really wants. At the beginning of the year, most investors and industry professionals were hoping for a rebound in home sales and activity and maybe even price growth. Unfortunately, that hasn't happened, and it's understandably got people frustrated. But the market isn't as bad as it seems. In fact, new data shows encouraging signs that we may have found a floor, that fears of a crash are well overblown, and that demand is actually solid. Today on the show, I'm going to share with you recent data that uncovers what housing market activity looks like in June 2026 and where we're heading the rest of the year.

0:43Plus, we're going to talk about how things could turn around, specifically about the war in Iran and what could happen with mortgage rates if a long-term peace deal is struck. This data, it can help you weather the slow market we're in. It can also help you take advantage of the opportunities that exist when everyone else is sitting on the sidelines. This is On The Market. Let's jump in.

1:13Hey everyone, it's Dave. Welcome to On The Market. Today, we're going to recap a whole slew of new housing market data that's been published in just the last week. And this data can give us key insights into what's happening in the spring market or what's not happening in the spring market. Because I won't lie to you, it's not all good, but you already know that. But it is better than I bet you think, or better at least than the headlines suggest. And today I am going to show you the complete picture. Plus, I want to talk a little bit more about what's going on with the war in Iran and how that's impacting the housing market.

1:51If you listened to our show last week where Jay Scott was on, we talked a lot about this. And although as of this recording, Israel and Iran are shooting rockets at one another and a peace deal remains elusive, I want to talk about how the market and specifically mortgage rates might react if a long-term deal is implemented. Let's get to it. We're going to start with some good news. We did a lot of frustrating headlines, not the best news on this show. That's just where we're at right now. But today we're going to start with some good news. And that good news is that housing demand, the amount of people who want to buy homes, is positive.

2:31I know this is hard to believe, but housing demand is actually up for the year. If you look at this in a couple of different ways, you see consistently that people still want to participate in the housing market, no matter what you hear elsewhere. The first way we know this is that pending sales, actual homes that are going under contract and selling are up. They're up 9 % year over year. That is a meaningful improvement from the previous year. And although it's been very volatile this year, we've had good months, we've had bad months. This, I think, is pretty encouraging because we're starting to see pending sales go up even during a time when, as of this recording, mortgage rates are like 6.6%.

3:13And so what that tells us is that even though rates have gone up, even though there's so much noise about the economy and inflation and all this stuff, and some of it's real, like that is important information. But despite that, the number of people still going out and buying homes is not just flat, it is actually up. And I personally find that encouraging. Now, there's another way that we can measure housing demand in the market, and that's by something called the mortgage purchase index. So basically, the Mortgage Bankers Association tracks how many people apply for new mortgages in a given week.

3:48So this doesn't count refinances or anything like that. People are going out to buy a new home. And this is more of a leading indicator. Like pending sales, the stuff I was just talking about tells us what's actually happening. But purchase applications tells us what might be happening two or three months down the line, because that's when people apply. They apply several weeks or months before they actually go up and buy. Purchase applications year over year are up 7%. There are more people right now applying for mortgages to go out and buy a home than there were last year. And so that's the good news I wanted to share up front because yes, it is frustrating this market that we're in.

4:29And I know people are saying all sorts of negative things about the housing market, But this is a positive sign about the market today. And I also think it's a positive sign of things to come because if rates do come down, if affordability does start to get better, then I can start to imagine things getting better in the housing market. It's not going to happen quickly. It's not going to happen all at once. But this shows that there is pent up demand, that people still want to be in the market. And that's good news. With that, let's move on to another key indicator that we have to track if we truly want to understand what is going on in the market right now, and that is inventory.

5:07Inventory, if you're not familiar, is basically just a measure of how many homes are for sale at any given point in time. And it's so important for understanding the market because it shows us the balance between supply and demand. When inventory is going up, that means there are more sellers than buyers. That means that we're in a buyer's market. And typically, that puts downward pressure on pricing, right? Because if there are more sellers than buyers, those sellers have to compete for the buyers that are in the market. And they do that by lowering prices. The opposite is also true if inventory is going down.

5:42There are more buyers than sellers. And those buyers have to compete for the homes on the market. And that usually pushes up prices. So that's why we track inventory, because it tells us so much in just one simple metric. and what inventory is telling us right now is that it's basically flat. It's actually slightly down year over year by like a percentage point or two. I would call that flat. I don't wanna nitpick these things. It's basically flat. And I think, although that's not a sign that things are getting better anytime soon, I do think this matters a lot for our understanding of the market and helps guide both what I'm doing with my investing and what I think you should be doing with your investing.

6:21Because first and foremost, Flat inventory at this point, where we are in the broader economy, is just another knock against this crash thesis that we hear that prices are going to go down dramatically and that we're going to see a 2008 style crash. That's not happening. Inventory would be rising. I was just explaining that, right? Inventory would be rising if things were moving closer to a crash. And that's not happening, right? We are not seeing inventory rise. They're actually down a little bit. Now, that means there aren't as many good deals when inventory is down, right? But that means that the market is pretty stable.

6:59And actually, if you think about it, the fact that it's trending negative means that in the last few weeks, at least, we've gotten further away from the prospect of a crash than we were a couple of weeks ago. And I don't think we were that close to a crash then. So I think if you were worried about prices going down dramatically, at least on a national basis, this is encouraging. Of course, on a regional basis, you should be looking at inventory in your area. You can look this up for free on Redfin or Zillow or Realtor.com or whatever. You can go and find this. But on a national basis, the idea that we're moving towards a crash is just not true.

7:36The other metric, similar to inventory, that we should be looking at as well is something called new listings. So when I said inventory before is a measure of how many homes are for sale at any given point, that can move up and down based on both supply and demand, right? Inventory can go up because no one's buying. Inventory can go down because people are buying a lot. It doesn't necessarily only have to do with supply and how many people are putting their homes for sale on the market. There's a different metric called new listings, which measures just how many people are putting their homes for sale in a given month.

8:14And that tells us a lot about sellers, right? It's very targeted at what sellers are doing. And what we see right now is that new listings are up, but only about four and a half percent over the last couple of months. And that's just on a weekly basis. The week before, it was down. So honestly, I would call it close to flat. If you look at the big picture about what's happened so far in 2026, it's not going up that much. And to me, that tells us two things. One, that the lock-in effect is still here, right? People are still staying in their homes. They are not motivated to be moving. And the second thing that perhaps more importantly, when we're talking, relating back to my previous point about a potential crash, is that there are no signs of forced selling in the market.

9:03I talk about this on the show a lot, But forced selling is something that would really indicate to us that a crash was coming. Because forced selling means people are falling behind on their mortgages. And rather than being locked in, which isn't great for the housing market, but for a seller, if you're locked in, that's a fine position to be in as long as you're making your mortgage payments. But when it tips from it being a lock in effect to being worrisome about a crash is when people no longer have the choice to sell, right? They are being forced to sell because they're not making their mortgage payments.

9:35They're underwater on their mortgage. The bank is going to foreclose. And there is no sign that that is happening. I have covered in recent episodes, you can go check it out, two weeks ago, I talked all about stress in the housing market and foreclosures and delinquencies on mortgage rates. We know that that's not that bad. It's up from pandemic lows, but it's right about pre-pandemic levels. So there's not a lot to worry about there. The other place we might see this is if we saw new listings start to shoot up. If we saw all of a sudden tons of people, despite high mortgage rates, starting to sell, that would be a little bit concerning.

10:12But again, that is not happening. And so when you look at the big picture of what's happening in the market, it really is what I've been calling it for years now. It is the great stall. We are stuck. Everyone on social media or in the mainstream media, they like to predict huge, dramatic swings one way or the other. Some people say, oh, we're going to get massive appreciation because there's more inflation. No. Some people say there's going to be a crash because inventory has gone up a little bit or mortgage rates are up a little bit. No, that is not what's happening. We are stalled out. And although that doesn't make great headlines, that's exactly where we are.

10:52And frankly, it's exactly what I've been saying for years now was going to happen. And I just say this and I do these episodes to reassure people because I get questions every single day about is the market going to crash? Is it a good time to buy? And what I try and reinforce in these episodes is that not much has changed. For three or four years, not much has changed. If you can find good deals, you should still go out and buy them. But if you're waiting around thinking that something is going to change dramatically where you're all of a sudden going to get way cheaper pricing or way more affordable housing or you're going to see runaway appreciation and you got to buy now, that's not what's happening.

11:35I just want everyone to remember that, that this is the great stall and it could take years to resolve. A lot of how long it will take will depend on inflation, the war in Iran, how that impacts prices and the global economy. A lot will depend on AI fears or dreams and which one actually comes true. But as we've seen all of these variables, the war in Iran, inflation, AI, these are not questions that get answered easily or quickly. We've been doing this for four years now, and we still don't have a line of sight on when things are going to get better. And so I want to encourage people to just accept that this is where we are.

12:15Could it change dramatically in a month or two? Sure, something crazy might happen, but people have been saying since 2022, right, the market's gonna crash or it's gonna start blowing up again. No, it's been in the great stall for four years now, and I would count on that for the foreseeable future. Now, this isn't negative, right? Like I'm just, it's neutral, right? I'm just saying what is. There are positive things, right? Housing demand is going up a little bit. Is it lower than normal housing demand? Yeah. Is it way lower than COVID demand? Yeah, absolutely. It's down like 50%. But like, has anything changed in the last three or four years since interest rates up?

12:57Has demand really changed? No. like that it is remain consistent. And that to me signals that we might just be at the floor. We found basically the lowest that home sales are going to go. Now, I should say, like I said before, I will just reiterate, could they go lower? Yes. But I think for that to happen, for us to break through this floor that we've been at for four years, we basically need one of two things to happen for demand to really go down. I think one is if mortgage rates go up back above 7%, right? People seem to get sensitive. If you look at the data, people stop buying as much around 7%.

13:38They actually get sensitive more around like 6.7, 6.8. So we're getting close to that. So if inflation keeps going up and we get above that, we could see demand go down more. The second thing that could impact demand negatively is unemployment going up, right? If unemployment goes up a lot, if we start to see it in the fives or 6%, we could see even slower home sales. I don't necessarily think that means we're going to see huge price declines, but it could slow the market even more. But as of now, that's not happening. We got a jobs report last week that showed that hiring was strong in May, and it showed that unemployment stayed steady at 4.3%, which historically is really low, even though it's a little bit higher than where it was during COVID.

14:26So unless one of those two things happens, I think this is just where we're at. And I'm not trying to be like overly optimistic about this. If you listen to this show, you know, I've been saying we're in a correction for years. I've been telling people it's not going to get better for a year, but I also don't think it's getting worse. And I do think that is worth saying because there is so much negativity about the housing market. And there's some good reason for that. Like affordability is super low. It is hard to make deals pencil, but it is not getting worse. And I do think that is important because for things to get better, it has to hit a bottom.

14:59And although there are some scenarios where we could see transactions go even lower for right now, it does feel like we found a bottom. And to me, that is an environment where you can invest in because it's actually kind of stable. As an investor, I just want things that are predictable. And although the economy is so confusing, if you look back at it, the housing market has been kind of predictable for the last couple of years. I've been saying that we'd be in this great stall and we are. And you can make decisions based on that. That is the thing you should take away from this information and this news is that this is where we're at.

15:37It's probably where we're going to stay. And if you can make deals pencil with that, go do it. If you can't, then maybe you wait. But I know people. I know many people. I personally am finding deals in this kind of market. And because things are relatively stable and demand is actually going up, I feel confident that I can underwrite my deals well and I can make strong decisions about my investments. And there's really not much more you can ask for than that. So that's the data I wanted to share with you guys. But I do want to talk about mortgage rates a little bit because I said they could go up if inflation goes up.

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18:28Welcome back to On the Market. I'm Dave Meyer. Before the break, we talked about housing demand and inventory. But I want to move our conversation to mortgage rates. Because one thing that could potentially move the market in either direction, honestly, is the war in Iran and whether or not there is a resolution. because remember, before the war, rates were in the best position we've seen in a while. They were right around 6%. So I went through a little bit of a thought exercise. Like if the war ended today, we've been hearing a lot about a peace deal, hasn't materialized yet, but if it happened, would we get lower rates?

19:07Could they go back down to six? Could they go lower than that? Sort of conversely, if we don't get a resolution, could we see higher mortgage rates and above that 7 % mark I talked about earlier. Let's dig into this because I do think, although like I said before, we are in the great stall, the thing that could change that and could really move the market in one way or another is if mortgage rates change meaningfully. So let's talk about the realities of that. Just background here, rates are really comprised of two things, mortgage rates. Number one, 10-year yields. This is the yield on a US treasury.

19:42This is basically people, investors going out and lending money to the US government for 10 years, and the yield is how much interest you earn on that. Right now, it's in the mid 4%. It's about 4.6 as of this recording, meaning if you went out, bought a treasury bill, and lent money to the U.S. government, you would earn about 4.6 % on that money every year for the next 10 years. That's one really important factor. I'm not going to fully get into why it's so important. I've done other episodes on that, but just trust me for this episode, 10-year yield's super, super important. The second thing here is known as the spread.

20:15And the spread is basically the amount difference between 10-year treasuries, like I just said, the yield on the 10-year U.S. treasury, and mortgage rates, right? So if a yield on a 10-year right now is 4.6, mortgage rates right now are about 6.6. That means the spread is 2 % or 200 basis points. You may hear them described either way. A basis point is one one hundredth of a percent. So those are the two variables, spreads and yield. So when we think about if rates could fall or go back up, we got to ask ourselves what happens with these two variables. And we'll start with spreads because spreads have actually been the good news in the mortgage market over the last couple of years.

20:57I'm not really going to get fully into why spreads are the way they are. That could be a whole long conversation. They are somewhat complicated, but it's basically just investors in mortgage-backed securities weighing how valuable mortgages are compared to buying a bond, right? They have those two choices where they're going to put their money. And if they don't think mortgages are good, the spread is going to go up. If they're excited about mortgages, the spreads come down. And the people who buy this stuff, the people who buy mortgage-backed securities or invest in bonds, they're very sensitive to inflation.

21:27And so if they fear of inflation or rate hikes, spreads tend to go up. If inflation fears ease or monetary policy loosens, we usually get lower spreads. The good news, like I said, is that over the last couple of years, spreads have really come down a lot. It's like basically the whole reason why mortgage rates have come down from the highs they were recently at around eight a couple of years ago to around six before the war is because spreads have compressed. Before COVID, the long-term average from the spread was about 190 basis points. Then they shot up to about 300 in 2024, and that was largely due to the Fed's tightening cycle.

22:06But once the Fed paused raising interest rates, inflation started to get under control a little bit. It came back down to the average, which is where we are right now, around 190 basis points. You can put this another way. Basically, if spreads, I know this sounds like esoteric, but if the spread hadn't come down, rates right now would be around 7.5 instead of 6.6, where they were this morning. And getting to our question about what happens if the war in Iran ends, I think this is good news. I think that lowers inflation fear. I think it lowers fear of Fed rate hikes, which, by the way, people are worried about that now.

22:43There are genuine concerns that the Fed's going to start hiking rates again. But if the war ends, those fears will be pushed aside a little bit and spreads are probably going to stay good. So good news there. But what about yields, our second variable? This, in my opinion, could be harder. It will probably, if the war ended today, they would start to come down. But it will probably take a little bit longer. Yields will take longer to adjust. And I think it won't happen fully. It might come down a little bit. If there was a ceasefire announced today, we'd probably see yields fall a little bit. But we still don't have a line of sight of when inflation is going to get under control and when the federal funds rate will start to come down.

23:25Because even if a ceasefire went into place and it was permanent today, inflation is forecasted to pick up throughout the year, even if it ended today. And so it's not like bond investors and mortgage-backed security investors are going to snap back to their expectations before the war, right? Inflation is enduring. It's still here. Hopefully, it will get under control quickly. But until it is under control, we are not likely to see Fed rate cuts. Actually, just last week, Christopher Waller, who votes on interest rate policy, he's normally someone who wants to lower interest rates. He changed his course and said that he thinks they need to be hawkish and really go after inflation.

24:07So the chance of Fed rate cuts has gone down a lot. That's going to impact yields. And inflation has been continuing to go up. Hopefully it will peak soon. But until it peaks and starts to come down, we're not going to get yields coming down. So I think even if the war ended today, it will take months, maybe into 2027 for rates to get back down to that 6 % that we had before the war. And the longer the war goes on, the longer the recovery will take because every day of the war, inflationary pressure builds. It is not a rubber band. It does not just snap back, right? Because oil production is down, it takes longer to boost those things back up.

24:52The fertilizer that's been stuck in the Strait of Hormuz for months, that goes into crops that are planted right now. So the price of those crops are going to be high until next year when there's a new set of crops, right? It doesn't snap back. It takes time. So this is why I say we're in this for a while. Even if the war ended today, it's going to be months at a minimum for rates to get back down. Now, what happens if there is no ceasefire? You know, if the war keeps going? I really do think things could get worse. Like, you know, I said a lot before about how we found the bottom. That's sort of presuming the status quo, where mortgage rates stay relatively unchanged.