According to HousingWire, we're seeing modest inventory growth as we hit mid-August, though the movement has been fairly muted throughout the year compared to what we experienced coming out of the pandemic. The reason is straightforward: higher mortgage rates have softened demand, which does push more homes onto the market, but the overall growth remains light. We're approaching what's considered normal inventory levels now, which makes it harder to see dramatic percentage increases compared to when we were climbing out of the historically low COVID-era numbers.
The data shows that demand tends to soften when mortgage rates climb above 6.64%, and that pattern has held true in 2026 just as it has in previous years. Since rates haven't broken above 7%, the changes we're seeing are gradual rather than sharp. New listings are following their typical seasonal pattern heading into fall and winter, ranging in the lower end of what we'd consider normal. There's nothing alarming here, though it's worth noting that current listing volumes are nowhere near what we saw during the housing bubble years when weekly new listings were running two to three times higher.
Mortgage rates have stayed below 7% largely because of favorable spreads between the 10-year yield and mortgage rates themselves. Even though there's ongoing geopolitical uncertainty that could push yields higher, these spreads have been doing the heavy lifting to keep rates manageable for buyers. HousingWire notes that spreads have narrowed only slightly from recent weeks and remain wider than their historical range, which is providing some buffer against further rate increases.
Looking at buyer activity, pending sales have turned slightly negative year over year now that rates have spent more time above that 6.64% threshold. Purchase applications, which give us a window into future sales, have also shown some weakness recently, with three weeks of negative year-over-year comparisons. That said, the declines haven't been dramatic, likely because rates are still under 7%. As we move through the rest of the year, it will become easier to see year-over-year growth in sales simply because last year at this time rates were lower and demand was stronger.
What I am seeing locally in the Bay Area and East Bay is consistent with what this national data is telling us: we're in a holding pattern where higher rates are keeping some buyers on the sidelines, but not creating a crisis. For sellers, it means inventory is gradually improving, which reduces that advantage you had when homes were scarce. For buyers, rates above 6.64% are creating headwinds, but we're not seeing panic or fire sales. It's a normalizing market, and that's actually healthier than what we dealt with during the pandemic years.
