Welcome to your latest CMRE market update! This week, we're dissecting a fascinating mix of news from the housing and mortgage sectors. From a surprising rebound in new home sales to the persistent challenge of elevated interest rates and a notable shift towards adjustable-rate mortgages, the landscape continues to evolve.
New Home Sales Find Their Rhythm
After a period of fluctuation, the new home market has found its stride, with sales seeing their fourth-biggest rebound in four years. August 2026 saw new single-family home sales climb to a seasonally adjusted annual rate of 684,000. This represents a healthy 6.4% increase from July's revised 643,000, pulling sales back above the 600,000 mark. While this is positive month-over-month growth, sales remain 2.0% below August of last year.
Inventory levels stayed largely consistent at 483,000 new houses for sale. With sales picking up and inventory holding steady, the implied supply tightened slightly to 8.5 months, down from 9.0 months in July and matching the level from August 2025.
Pricing showed a mixed picture. The median sales price nudged up 0.4% from July to $393,700, though it remains 5.8% lower than August 2025. The average sales price, however, fell more sharply, down 9.1% from July and 8.8% from last year, settling at $478,700. It's crucial to remember that these price movements don't always adjust for changes in home characteristics like square footage or location.
Mortgage Rates Climb, Shifting Borrower Behavior
Mortgage demand remained subdued last week as the 30-year fixed rate surged past the 7% mark. The Mortgage Bankers Association (MBA) reported a 1.5% decline in total mortgage application volume for the week ending September 18. This follows a 4.1% drop the week prior.
Purchase activity, though down 1% week-over-week, has generally been moving sideways for several weeks, indicating a persistent, albeit cautious, demand from buyers. Refinance demand, on the other hand, was notably sluggish, declining another 3% and standing 62% lower than a year earlier. This marks the slowest pace of refinancing since February 2025, as few existing borrowers can benefit from current higher rates.
"Mortgage rates vaulted higher last week, with the 30-year fixed rate at 7.12 percent – the highest level since May 2024," stated Mike Fratantoni, MBA's SVP and Chief Economist. This elevated fixed rate environment is prompting a significant shift: more borrowers are considering adjustable-rate mortgages (ARMs).
ARMs now account for 9.8% of application volume, up from 8.4% the week before. The average rate for a 5/1 ARM fell to 6.10%, creating a spread of over a full percentage point below the 30-year fixed rate. This substantial difference is making ARMs a more attractive, and increasingly noticeable, option for those facing fixed rates at 7% or higher.
Pending Home Sales See Modest Bounce, Regionally Divergent
Contracts signed on existing homes, tracked by the National Association of REALTORS® (NAR) Pending Home Sales Index (PHSI), edged slightly higher in August. The PHSI increased 0.3% from July, though it remained 4.7% lower than a year earlier. This modest gain comes despite the continued pressure from elevated mortgage rates.
NAR Chief Economist Lawrence Yun noted that while income growth has been outpacing home price growth, high borrowing costs continue to limit purchasing power and overall housing demand. Pending sales are still roughly 30% below pre-pandemic levels nationally, reinforcing the idea that lower mortgage rates are a key factor in bringing sidelined buyers back into the market.
Regionally, results were varied. The South saw a 2.3% increase and the West a 3.0% increase month-over-month. However, these gains were offset by declines in the Northeast (-4.2%) and Midwest (-1.6%). Year-over-year, all regions showed declines, with the West experiencing the largest drop at -6.7%.
In summary, while new home sales and pending contracts show resilience with modest monthly gains, the overarching theme remains the impact of higher mortgage rates. Borrowers are adapting, with ARMs gaining favor, as the market navigates this challenging rate environment. Keep an eye on these trends with CMRE as we continue to track the dynamic real estate and mortgage landscape!