Weekly Economic Recap 10.19-10.25 2026

Weekly Economic Recap: October 19 – October 25, 2026
Energy-driven inflation re-accelerated, mortgage applications fell to their lowest level since January 2025, and housing data weakened across the board, even as jobless claims stayed near multi-decade lows.

Housing
NAHB Housing Market Index: Homebuilder confidence fell for a second straight month in October, with the NAHB/Wells Fargo index dropping to 29 from 32, its lowest level since June 2012 and below the 32 forecast. Current sales conditions, six-month sales expectations, and buyer traffic all declined, and 43% of builders cut prices, the highest share since 2020, with the average cut holding at 6%. NAHB's chief economist said higher mortgage rates, elevated construction costs, and weaker consumer confidence are keeping buyers on the sidelines despite ongoing demand.

Housing Starts: Starts fell 5.2% in September to a seasonally adjusted annual rate of 1.221 million, the third straight monthly decline and below the 1.30 million forecast. Single-family starts dropped 4.6% to a one-year low of 859,000, and multi-family starts fell 7.2% to 349,000, as high mortgage rates and sluggish demand lead builders to scale back. Regionally, the West (-23.2%) and Midwest (-19.0%) saw sharp drops, the Northeast was unchanged, and the South rose 6.1%.

Pending Home Sales: Pending sales fell 7.3% in September to the lowest level on record, far worse than the 0.5% decline economists expected. Soaring mortgage rates, driven by high inflation expectations, widening federal deficits, and decade-high long-term Treasury yields, were the main cause. Sales dropped in every region: West (-9.2%), South (-8.2%), Midwest (-6.5%), and Northeast (-4.2%). NAR's chief economist said job and income gains can support purchases, but affordability is more sensitive to changes in mortgage rates.

MBA 30-Year Mortgage Rate: The average 30-year fixed rate fell 9 basis points to 7.41% for the week ended October 16, the first decline in 11 weeks after eight straight increases. Treasury yields dropped amid a flight to safety and growing expectations that the Fed will hold rates steady this month.

Mortgage Applications: Applications fell 5.3% for a seventh straight weekly decline, the lowest level since January 2025. Purchase applications dropped 7.3% and refinancing applications fell 2%. Borrowing costs remain near a three-year high, and rising bond yields and expectations of a higher-for-longer Fed, driven by energy-fueled inflation tied to the Iran war, continue to weigh on demand.

Labor Market
Jobless Claims: Initial claims fell by 6,000 to 194,000 for the week ended October 17, beating the 200,000 forecast and reaching the lowest level since mid-July. The 4-week average fell to 197,750 from 198,750, the lowest in about four years, pointing to a labor market with very few layoffs. Continuing claims rose by 25,000 to 1.728 million in the week ended October 10, the highest in six weeks and above the 1.72 million forecast. Strong corporate profits and resilient demand are shielding workers from layoffs, though energy costs tied to the Iran war, Fed rate uncertainty, and unsettled trade policy are weighing on hiring.

Consumer Sentiment
Michigan Consumer Sentiment (Final): The index was revised up to 48.0 in October from a preliminary 46.3, but it remains at its lowest level in five months. The Current Conditions subindex fell as durable goods buying conditions plunged 18% on higher interest rates and affordability worries. Sentiment is now 10% below a year ago and 15% below February, just before the Iran conflict.

Michigan Inflation Expectations (Final): Year-ahead inflation expectations edged up to 4.7% from 4.6%. The five-year outlook rose to 3.5% from 3.4% in September, the second straight monthly increase and the highest reading since May.

The Bottom Line
Energy-driven inflation re-accelerated in September, with CPI up 0.6% for the month and 3.7% from a year ago, which keeps the Fed leaning toward another rate hike. With mortgage rates near three-year highs and applications at their lowest since January 2025, the housing market is feeling it. The labor market remains strong, with jobless claims near multi-decade lows, so borrowing costs are unlikely to ease soon. Rising inventory is giving buyers more negotiating power, while sellers and investors should price realistically and underwrite deals at today's financing costs.