07/15/2026
Midyear market checkup: Finding balance after a chaotic spring
After two years of disappointing sales, many expected a breakout spring season fueled by lower mortgage rates. But then the Iran war and inflation interfered.
After starting 2026 in the double-digits, inventory growth is now virtually unchanged from a year ago, but buyers still have plenty of options.
Pending sales climbed 5% year-over-year in May and June, suggesting the first half of this year ended with a strong sales pace.
More sellers have come to accept the reality of a cooler housing market and are meeting buyers in the middle to make deals happen.
Decisions in residential real estate are often based on market data — sometimes conflicting, often confusing. Housing Market Decoded, authored by economists and other market experts, helps put the data in context so you can make sense of the numbers.
When mortgage rates dipped below 6% in February, the housing market seemed primed for a rebound. Instead, the war in the Middle East — and the rise in energy costs, overall inflation and interest rates that followed — dashed hopes for resurgent demand and yielded a balanced, even buyer-friendly market at the midpoint of the year.
Inventory growth flattens to 'new normal' levels.
The number of active for-sale listings is my favorite barometer of housing market health because it reflects the recent balance of supply and demand while also providing an early indication of where home prices are headed. Realtor.com reported active listings just 2% higher at mid-year than at the midpoint of 2025. That follows steady deceleration from double-digit growth of active listings as recently as January of this year, putting inventory on a glide path that closely
The rapid growth of inventory during the middle of 2025 signaled a market that was quickly swinging out of sellers' favor. Now, inventory is virtually unchanged from a year ago and remains below pre-pandemic levels. This suggests the market is settling into a new normal, albeit one in which sellers face fierce competition, and buyers have more options than they've had in the last five years.
Home sales are showing signs of life
Even as mortgage rates hovered around 6.5% this spring, homebuyers proved resilient, thanks to pent-up demand following a shortage of sales over the last three years. NAR reported existing home sales at a solid annualized rate of 4.17 million in May, marking the highest pace of closed sales (seasonally adjusted) since December and a 3.2% increase from April.
For a more forward-looking measure, Realtor.com's count of pending sales climbed 5% year-over-year in both May and June, suggesting the first half of this year ended with a strong sales pace, assuming those pending sales close at a normal.
The secret to sales volume holding? Sellers meeting buyers where they're at.
The bump in sales activity late in the spring was not accompanied by a surge in pricing. On the contrary, home prices have been flat or down slightly, depending on the metric. The median active list price per square foot in June was 2% below last year's level, as more sellers have come to accept the reality of a cooler housing market. Now they are meeting buyers in the middle to make deals happen. In fact, median list prices per square foot have trailed 2025 levels every month so far in 2026 and don't look likely to surpass them anytime soon.
NAR reported a median existing home sale price of $429,300 in May, up 1.3% from last year. That aligns with the S&P Cotality Case-Shiller National Home Price Index, which showed annual home price growth of just 0.8% in April. No matter the metric, home prices appear to be largely flat, and, after adjusting for inflation, may even be falling in real terms.
A cooler pace of price appreciation is giving incomes time to catch up with the higher costs of homeownership in today's mortgage environment, creating a healthier housing market where more people can actually afford to buy a home. At the same time, higher inventory, without creating a glut, gives buyers a better chance of finding the right home. For these reasons, I expect home sales to continue climbing year-over-year in the second half of 2026, as buyers leave the chaos of the Iran war in the rearview mirror and take advantage of the more abundant, lower-priced inventory on the market this summer.
Jeff Tucker - Principal Economist for Windermere Real Estate, where he analyzes economic data to explain its impact on national and regional housing markets. He previously spent five years at Zillow, researching housing market trends, authoring reports and presenting to policy makers. The views expressed in this column are solely those of the author.
