CMRE Market Watch: Shifting Sands - Inventory Rises, Sales Dip as Rates Hold Strong

The landscape of the Custom Mortgage Real Estate (CMRE) market is experiencing a significant shift, presenting a mix of challenges and emerging opportunities for buyers and sellers alike. Recent reports from the National Association of REALTORS® (NAR) and the Mortgage Bankers Association (MBA) paint a nuanced picture: while elevated mortgage rates are cooling sales, a much-needed increase in housing inventory is offering buyers more options.

Existing Home Sales Slow as Inventory Builds

For the first time since June 2025, existing-home sales have dipped below the 4 million annualized pace. In August 2026, sales slipped by 2.0% from July to a seasonally adjusted annual rate of 3.98 million, and were 1.2% lower than a year earlier. Lawrence Yun, NAR Chief Economist, attributes this mild dip primarily to high mortgage rates.

However, the more encouraging news comes from the supply side. Total housing inventory rose to 1.62 million units in August 2026, a 3.2% increase from July and a substantial 5.9% rise from a year ago. This marks the first time since November 2019 that inventory has exceeded 1.6 million units, pushing the market to a 4.9-month supply – its highest level in over a decade. This growing supply should empower buyers with more choices and room for negotiation.

Despite the increase in inventory, home prices continue their upward trajectory, albeit at a more modest pace. The median existing-home price reached $429,100 in August 2026, a 1.6% increase from August 2025. This marks the 38th consecutive month of year-over-year price appreciation.

Mortgage Demand Reacts to Rising Rates

Mortgage application activity has also seen shifts, predominantly driven by the persistent climb in interest rates. For the week ending September 4, total application volume decreased by 2.7% on a seasonally adjusted basis, with refinancing demand experiencing a sharp 6% decline. The Refinance Index reached its slowest weekly pace since May 2025, and this trend is expected to accelerate given the rate spikes that occurred after this data was collected.

Purchase applications, however, have shown more resilience, slipping only 0.2% week-over-week but remaining 4% higher than the same week a year ago. This suggests that despite higher borrowing costs, a segment of buyers is still actively pursuing homeownership.

Joel Kan, MBA’s Vice President and Deputy Chief Economist, noted that the 30-year fixed rate reached 6.85% for the week ending September 4, its highest level since June 2025. Another report for the week ending August 28 saw rates reaching their highest levels in four weeks.

In response to these elevated rates, borrowers are increasingly turning to adjustable-rate mortgages (ARMs). The ARM share of activity climbed to 8.0% for the week ending August 28, its highest level in five weeks, as the average rate for a 5/1 ARM stood at a more attractive 5.94%.

What This Means for You

The current market presents a dynamic environment. While higher rates are undoubtedly a challenge, the growing inventory offers a glimmer of hope for buyers looking for more options and potential negotiating power. Sellers, on the other hand, might need to adjust expectations slightly as the market moves away from intense bidding wars. Whether you're navigating rising rates with an ARM or capitalizing on increased inventory, understanding these trends is key to making informed real estate decisions. Custom Mortgage Real Estate is here to guide you through every step.