Thursday: Happy New Year!

Note: Mortgage rates are from MortgageNewsDaily.com and are for top tier scenarios.

Thursday:
• The NYSE and the NASDAQ will be closed in observance of the New Year’s Day holiday

Question #4 for 2026: What will the participation rate be in December 2026?

Earlier I posted some questions on my blog for next year: Ten Economic Questions for 2026. Some of these questions concern real estate (inventory, house prices, housing starts, new home sales), and I posted thoughts on those in the newsletter (others like GDP and employment will be on this blog).

I'm adding some thoughts and predictions for each question.

Here is a review of the Ten Economic Questions for 2025.

4) Participation Rate: In November 2025, the overall participation rate was at 62.5%, unchanged year-over-year from 62.5% in November 2024, and below the pre-pandemic level of 63.3% in February 2020. Long term, the BLS is projecting the overall participation rate will decline to 61.1% by 2034 due to demographics. What will the participation rate be in December 2026?

The overall labor force participation rate is the percentage of the working age population (16 + years old) in the labor force.   A large portion of the decline in the participation rate since 2000 was due to demographics and long-term trends.

The Labor Force Participation Rate in November 2025 was at 62.5% (red), down from the pre-pandemic level of 63.3% in February 2020, and up from the pandemic low of 60.2% in April 2020. (Blue is the employment population ratio).

From February 2020 to April 2020, 12 million people had left the labor force due to the pandemic.   By November 2025, the labor force was about 4 million higher than the pre-pandemic high.  

Population growth had been weak in the 2010s, but picked up over the last few years, primarily due to more immigration.   However, net immigration slowed in late 2024 and slowed sharply in 2025.

The second graph shows the participation rate for "prime age" workers (25 to 54 years old). The 25 to 54 participation rate was at 83.8% in November 2025 Red), above the pre-pandemic level of 83.0% - and near the all time high of 84.6% in 1999.  This suggests there are very few prime age workers that will return to the labor force.

This means demographics will be the key driver of the participation rate in 2026 (barring some unseen event).  Demographics will be pushing the participation rate down over the next decade, so, my guess is the participation rate will decline by 0.2 to 0.3 percentage points over the next year to around 62.3% in December 2026.

Here are the Ten Economic Questions for 2026 and a few predictions:

• Question #1 for 2026: How much will the economy grow in 2026? Will there be a recession in 2026?

• Question #2 for 2026:  How much will job growth slow in 2026? Or will the economy lose jobs?

• Question #3 for 2026: What will the unemployment rate be in December 2026?

• Question #4 for 2026: What will the participation rate be in December 2026?

• Question #5 for 2026: What will the YoY core inflation rate be in December 2026?

• Question #6 for 2026: What will the Fed Funds rate be in December 2026?

• Question #7 for 2026: How much will wages increase in 2026?

• Question #8 for 2026: How much will Residential investment change in 2026? How about housing starts and new home sales in 2026?

• Question #9 for 2026: What will happen with house prices in 2026?

• Question #10 for 2026: Will inventory increase further in 2026?

Freddie Mac House Price Index Up 1.0% Year-over-Year in November

Today, in the Calculated Risk Real Estate Newsletter: Freddie Mac House Price Index Up 1.0% Year-over-Year in November

A brief excerpt:

Freddie Mac reported that its “National” Home Price Index (FMHPI) increased 0.19% month-over-month (MoM) on a seasonally adjusted (SA) basis in November.

On a year-over-year (YoY) basis, the National FMHPI was up 1.0% in November, down from up 1.1% YoY in October. The YoY increase peaked at 19.2% in July 2021, and for this cycle, and previously bottomed at up 1.1% YoY in April 2023. The YoY change in November is a new cycle low. ...

As of November, 19 states and D.C. were below their previous peaks, Seasonally Adjusted. The largest seasonally adjusted declines from the recent peaks are in D.C. (-4.9%), Montana (-3.2%), and Florida (-2.8%).

For cities (Core-based Statistical Areas, CBSA), 140 of the 387 CBSAs are below their previous peaks.

Here are the 30 cities with the largest declines from the peak, seasonally adjusted. Punta Gorda has passed Austin as the worst performing city. Note that 5 of the 6 cities with the largest price declines are in Florida.

A third of the cities on the list are in Florida.

There is much more in the article!

Weekly Initial Unemployment Claims Decrease to 199,000

The DOL reported:

In the week ending December 27, the advance figure for seasonally adjusted initial claims was 199,000, a decrease of 16,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 214,000 to 215,000. The 4-week moving average was 218,750, an increase of 1,750 from the previous week's revised average. The previous week's average was revised up by 250 from 216,750 to 217,000.
emphasis added

The following graph shows the 4-week moving average of weekly claims since 1971.

Click on graph for larger image.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims increased to 218,750.

Wednesday: Unemployment Claims

Note: Mortgage rates are from MortgageNewsDaily.com and are for top tier scenarios.

Wednesday:
• At 8:30 AM, The initial weekly unemployment claims report will be released.  

FHFA’s Q3 National Mortgage Database: Outstanding Mortgage Rates, LTV and Credit Scores

Today, in the Calculated Risk Real Estate Newsletter: FHFA’s Q3 National Mortgage Database: Outstanding Mortgage Rates, LTV and Credit Scores

A brief excerpt:

Here are some graphs on outstanding mortgages by interest rate, the average mortgage interest rate, borrowers’ credit scores and current loan-to-value (LTV) from the FHFA’s National Mortgage Database through Q3 2025 (released this morning).
...
This shows the surge in the percent of loans under 3% starting in early 2020 as mortgage rates declined sharply during the pandemic.

Note that a fairly large percentage of mortgage loans were under 4% prior to the pandemic!

The percent of outstanding loans under 4% peaked in Q1 2022 at 65.1% (now at 51.5%), and the percent under 5% peaked at 85.6% (now at 68.6%). These low existing mortgage rates make it difficult for homeowners to sell their homes and buy a new home since their monthly payments would increase sharply.

This was a key reason existing home inventory levels were so low. However, time is eroding this lock-in effect.

There is much more in the article.

FOMC Minutes: Further Cuts "Likely" Appropriate if Inflation Declines as Expected

From the Fed: Minutes of the Federal Open Market Committee, December 9–10, 2025. Excerpt:

In their consideration of monetary policy at this meeting, participants noted that inflation had moved up since earlier in the year and remained somewhat elevated. Participants further noted that available indicators suggested that economic activity had been expanding at a moderate pace. They observed that job gains had slowed this year and that the unemployment rate had edged up through September. Participants assessed that more recent indicators were consistent with these developments. In addition, they judged that downside risks to employment had risen in recent months.

Against this backdrop, most participants supported lowering the target range for the federal funds rate at this meeting, while some preferred to keep the target range unchanged. A few of those who supported lowering the policy rate at this meeting indicated that the decision was finely balanced or that they could have supported keeping the target range unchanged. Those who favored lowering the target range for the federal funds rate generally judged that such a decision was appropriate because downside risks to employment had increased in recent months and upside risks to inflation had diminished since earlier in 2025 or were little changed. Some of these participants emphasized that lowering the target range for the federal funds rate at this meeting was in line with a forward-looking approach to the pursuit of the Committee's dual-mandate objectives. These participants noted that reducing the policy rate at this meeting would be consistent with the projected decline in inflation over coming quarters while contributing to a strengthening of economic activity in 2026 that would help stabilize labor market conditions after this year's cooling. Those who preferred to keep the target range for the federal funds rate unchanged at this meeting expressed concern that progress toward the Committee's 2 percent inflation objective had stalled in 2025 or indicated that they needed to have more confidence that inflation was being brought down sustainably to the Committee's objective. These participants also noted that longer-term inflation expectations could rise should inflation not return to 2 percent in a timely manner. Some participants who favored or could have supported keeping the target range unchanged suggested that the arrival of a considerable amount of labor market and inflation data over the coming intermeeting period would be helpful in making judgments on whether a rate reduction was warranted. A few participants judged that lowering the federal funds rate target range at this meeting was not justified because data received over the intermeeting period did not suggest any significant further weakening in the labor market. One participant agreed with the need to move toward a more neutral monetary policy stance but preferred lowering the target range by 1/2 percentage point at this meeting.

In considering the outlook for monetary policy, participants expressed a range of views about the restrictiveness of the Committee's policy stance. Most participants judged that further downward adjustments to the target range for the federal funds rate would likely be appropriate if inflation declined over time as expected. With respect to the extent and timing of additional adjustments to the target range for the federal funds rate, some participants suggested that, under their economic outlooks, it would likely be appropriate to keep the target range unchanged for some time after a lowering of the range at this meeting. A few participants observed that such an approach would allow policymakers to assess the lagged effects on the labor market and economic activity of the Committee's recent moves toward a more neutral policy stance while also giving policymakers time to acquire more confidence about inflation returning to 2 percent. All participants agreed that monetary policy was not on a preset course and would be informed by a wide range of incoming data, the evolving economic outlook, and the balance of risks.

In discussing risk-management considerations that could bear on the outlook for monetary policy, participants generally judged that upside risks to inflation remained elevated and that downside risks to employment were elevated and had increased since the middle of 2025. Most participants noted that a move toward a more neutral policy stance would help forestall the possibility of a major deterioration in labor market conditions. Many of these participants also judged that the available evidence pointed to a reduced probability that tariffs would lead to persistent inflation pressures. These participants observed that it was appropriate for the Committee to ease its policy stance in response to downside risks to employment, thereby helping to bring the risks to achieving the dual-mandate goals into better balance, and suggested that a move toward a more neutral policy stance at this meeting would leave policymakers well positioned to determine the extent and timing of additional adjustments to the policy rate, with these judgments being based on the incoming data, the evolving outlook, and the balance of risks. By contrast, several participants pointed to the risk of higher inflation becoming entrenched and suggested that lowering the policy rate further in the context of elevated inflation readings could be misinterpreted as implying diminished policymaker commitment to the 2 percent inflation objective. Participants judged that a careful balancing of risks was required and agreed on the importance of well-anchored longer-term inflation expectations in achieving the Committee's dual-mandate objectives.
emphasis added

Newsletter: Case-Shiller: National House Price Index Up 1.4% year-over-year in October

Today, in the Calculated Risk Real Estate Newsletter: Case-Shiller: National House Price Index Up 1.4% year-over-year in October

Excerpt:

S&P/Case-Shiller released the monthly Home Price Indices for October ("October" is a 3-month average of August, September and October closing prices). August closing prices include some contracts signed in June, so there is a significant lag to this data. Here is a graph of the month-over-month (MoM) change in the Case-Shiller National Index Seasonally Adjusted (SA).

The National index increased 0.37% month-over-month (MoM). This is the 3rd consecutive month with a MoM increase seasonally adjusted that followed 5 consecutive months with a MoM decline.

There is much more in the article.

Case-Shiller: National House Price Index Up 1.4% year-over-year in October

S&P/Case-Shiller released the monthly Home Price Indices for October ("October" is a 3-month average of August, September and October closing prices).

This release includes prices for 20 individual cities, two composite indices (for 10 cities and 20 cities) and the monthly National index.

From S&P S&P Cotality Case-Shiller Index Records Annual Gain in October 2025

• The S&P Cotality Case-Shiller U.S. National Home Price NSA Index posted a 1.4% annual gain for October, up from a 1.3% rise in the previous month.

• Regional divergence persists as Midwestern and Northeastern markets, led by Chicago (5.8%) and New York (5.0%), outpaced Sun Belt cities like Tampa (–4.2%) and Phoenix (–1.5%).

• Sixteen of 20 markets declined month-over-month in October, signaling broad stagnation as high mortgage rates weigh on affordability and suppress price momentum.
...
“October’s data show the housing market settling into a much slower gear, with the National Composite Index up only about 1.4% year over year – among the weakest performances since mid-2023,” said Nicholas Godec, CFA, CAIA, CIPM, Head of Fixed Income Tradables & Commodities at S&P Dow Jones Indices. “This figure is essentially unchanged from September’s 1.3% annual gain and represents less than a third of the 5.1% average home price increase recorded in 2024. National home prices also continue to lag consumer inflation, as October’s CPI is estimated around 3.1% (based on a provisional index the U.S. Treasury announced due to the federal data shutdown) – roughly 1.8 percentage points higher than the latest housing appreciation. In real terms, that gap implies a slight decline in inflation-adjusted home values over the past year.

“Regional performance underscores a striking geographic rotation. Chicago now leads all major markets with a 5.8% annual price gain, followed by New York at 5.0% and Cleveland at 4.1%. These traditionally stable Midwestern and Northeastern metros have sustained solid growth even as broader conditions soften. By contrast, Tampa home prices are down 4.2% year over year – the steepest drop among the 20 cities, marking Tampa’s 12th consecutive month of annual declines. Other former high- flyers in the Sun Belt are similarly struggling: Phoenix (-1.5%), Dallas (-1.5%), and Miami (-1.1%) all remain in negative territory. It’s a stark reversal from the pandemic boom, as the markets that were once ‘pandemic darlings’ are now seeing the sharpest corrections while more traditional metros continue to post modest gains.
...
The S&P Cotality Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 1.4% annual gain for October, up from a 1.3% rise in the previous month. The 10- City Composite showed an annual increase of 1.9%, down from a 2.0% increase in the previous month. The 20-City Composite posted a year-over-year increase of 1.3%, down from a 1.4% increase in the previous month.
...
The pre-seasonally adjusted U.S. National, 10-City Composite, and 20-City Composite Indices continued to report negative month-over-month changes in October, posting a -0.3% drop for the 20- City Composite Index and -0.2% decreases for both the 10-City Composite and U.S. National Indices.

After seasonal adjustment, the U.S. National Index reported a monthly increase of 0.4% and both the 10-City Composite and 20-City Composite Indices posted month-over-month gains of 0.3%. emphasis added

Click on graph for larger image.

The first graph shows the nominal seasonally adjusted Composite 10, Composite 20 and National indices (the Composite 20 was started in January 2000).

The Composite 10 index was up 0.3% in October (SA).  The Composite 20 index was up 0.3% (SA) in October.

The National index was up 0.4% (SA) in October.

The second graph shows the year-over-year change in all three indices.

The Composite 10 NSA was up 1.9% year-over-year.  The Composite 20 NSA was up 1.3% year-over-year.

The National index NSA was up 1.4% year-over-year.

Annual price changes were close to expectations.  I'll have more later.

Tuesday: Case-Shiller House Prices, Chicago PMI, FOMC Minutes

From Matthew Graham at Mortgage News Daily: New 2-Month Lows, Just Barely

With another holiday closure on deck and light calendar of events, the rate market is off to another uneventful start this week. In fact, the average lender barely budged from last Friday. But it was enough for MND's 30yr fixed rate index to tick down by 0.01%.

This is the lowest level since October 28th--just barely edging out the lows seen on November 25th. There were only 5 days in November and one day in September with lower rates. Before that, you'd have to go back to September 2024 to see anything lower.[30 year fixed 6.194%]
emphasis added

Tuesday:
• At 9:00 AM ET, FHFA House Price Index for October. This was originally a GSE only repeat sales, however there is also an expanded index. 

• Also at 9:00 AM, S&P/Case-Shiller House Price Index for October. The consensus is for an 1.1% year-over-year increase in the Composite 20 index for October.

• At 9:45 AM, Chicago Purchasing Managers Index for December.

• At 2:00 PM, FOMC Minutes, Meeting of December 9-10<

Question #5 for 2026: What will the YoY core inflation rate be in December 2026?

Earlier I posted some questions on my blog for next year: Ten Economic Questions for 2026. Some of these questions concern real estate (inventory, house prices, housing starts, new home sales), and I posted thoughts on those in the newsletter (others like GDP and employment will be on this blog).

I'm adding some thoughts and predictions for each question.

Here is a review of the Ten Economic Questions for 2025.

5) Inflation: Core PCE was up 2.8% YoY through September. This was down from a peak of 5.6% in early 2022.  The FOMC is forecasting the YoY change in core PCE will be in the 2.4% to 2.6% range in Q4 2025. Will the core inflation rate decrease further in 2026, and what will the YoY core inflation rate be in December 2026?

Although there are different measures for inflation, they all show inflation above the Fed's 2% inflation target on a year-over-year basis.

Note:  I follow several measures of inflation, including median CPI and trimmed-mean CPI from the Cleveland Fed.  Also core PCE prices (monthly from the BEA) and core CPI (from the BLS).

Click on graph for larger image.

On a year-over-year basis, the median CPI rose 3.1% in November (down from 3.5% YoY in September), the trimmed-mean CPI rose 2.9% (down from 3.3%), and the CPI less food and energy rose 3.0% (down from 3.2%). 

Core PCE is for September was up 2.8% YoY, down from 2.9% in August.

The Fed is projecting core PCE inflation will decrease to 2.4% to 2.6% by Q4 2026. 

The good news is we should expect a further decline in housing inflation (asking rents have been flat for 3 years, and it takes time for the previous rent increases to filter through to renewals).  And inflation was fairly high in January last year (CPI up 5.7% annual rate, Core CPI up 5.5% annual rate) - so it is likely YoY measures of inflation will decline further in January.

From Goldman Sachs economists last week:

"We expect core PCE inflation to slow to 2.1% by the end of 2026 as tariff pass-through fades and wage growth and shelter inflation continue to fall."

My guess is core PCE inflation (year-over-year) will decrease in 2026 (from the current 2.8%) but still be above the Fed's 2% target by Q4 2026 (and above Goldmans forecast of 2.1%).  

Here are the Ten Economic Questions for 2026 and a few predictions:

• Question #1 for 2026: How much will the economy grow in 2026? Will there be a recession in 2026?

• Question #2 for 2026:  How much will job growth slow in 2026? Or will the economy lose jobs?

• Question #3 for 2026: What will the unemployment rate be in December 2026?

• Question #4 for 2026: What will the participation rate be in December 2026?

• Question #5 for 2026: What will the YoY core inflation rate be in December 2026?

• Question #6 for 2026: What will the Fed Funds rate be in December 2026?

• Question #7 for 2026: How much will wages increase in 2026?

• Question #8 for 2026: How much will Residential investment change in 2026? How about housing starts and new home sales in 2026?

• Question #9 for 2026: What will happen with house prices in 2026?

• Question #10 for 2026: Will inventory increase further in 2026?

NAR: Pending Home Sales Increased 3.3% in November; Up 2.6% YoY

From the NAR: NAR Pending Home Sales Report Shows 3.3% Increase in November

Pending home sales in October increased by 1.9% from the prior month and fell 0.4% year over year, according to the National Association of REALTORS® Pending Home Sales Report. ...

Month-Over-Month
3.3% increase in pending home sales
Gains in all four regions

Year Over Year
2.6% increase in pending home sales
Gains in all four regions
emphasis added

Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in December and January.

Housing December 29th Weekly Update: Inventory Down 2.9% Week-over-week

Altos reports that active single-family inventory was down 2.9% week-over-week.  

Note that Inventory usually bottoms seasonally in January or February.

The first graph shows the seasonal pattern for active single-family inventory since 2015.

Click on graph for larger image.

The red line is for 2025.  The black line is for 2019.  

Inventory was up 13.1% compared to the same week in 2024 (last week it was up 13.5%), and down 6.0% compared to the same week in 2019 (last week it was down 5.7%). 

Inventory started 2025 down 22% compared to 2019.  Inventory and closed most of that gap, however inventory was still down 6% compared to 2019 at the end of the year.

This second inventory graph is courtesy of Altos Research.

As of December 26th, inventory was at 736 thousand (7-day average), compared to 758 thousand the prior week.  

Mike Simonsen discusses this data and much more regularly on YouTube

Sunday Night Futures

Weekend:
• Schedule for Week of December 28, 2025

• Question #6 for 2026: What will the Fed Funds rate be in December 2026?

Monday:
• At 10:00 AM ET, Pending Home Sales Index for November. The consensus is for a 1.0% increase in the index.

• At 10:30 AM, Dallas Fed Survey of Manufacturing Activity for December. This is the last of regional manufacturing surveys for December.

From CNBC: Pre-Market Data and Bloomberg futures S&P 500 are up 1 and DOW futures are up 28 (fair value).

Oil prices were down over the last week with WTI futures at $57.02 per barrel and Brent at $61.03 per barrel. A year ago, WTI was at $71, and Brent was at $74 - so WTI oil prices are down about 20% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.76 per gallon. A year ago, prices were at $2.98 per gallon, so gasoline prices are down $0.22 year-over-year.

Question #6 for 2026: What will the Fed Funds rate be in December 2026?

Earlier I posted some questions on my blog for next year: Ten Economic Questions for 2026. Some of these questions concern real estate (inventory, house prices, housing starts, new home sales), and I posted thoughts on those in the newsletter (others like GDP and employment will be on this blog).

I'm adding some thoughts and predictions for each question.

Here is a review of the Ten Economic Questions for 2025.

6) Monetary Policy:  The FOMC cut the federal funds rate three times in 2025 from "4-1/4 to 4-1/2 percent" at the beginning of 2025, to "3-1/2 to 3-3/4" at the end of the year. The mid-range on the "dot plot" suggests many FOMC participants expect around one to two 25 bp rate cuts in 2026.  What will the Fed Funds rate be in December 2026?

As of December, looking at the "dot plot", the FOMC participants see the following number of rate moves in 2026:

25 bp Rate Moves	FOMC Members 2026
One Rate Hike	3
No Change	4
One Rate Cut	4
Two Rate Cuts	4
Three Rate Cuts	2
Four Rate Cuts	1
More than Four	1

This is a wide range of views.

Goldman Sachs economists think there will be 2 rate cuts in 2026:

"We expect the FOMC to compromise on two more 25bp cuts to 3-3.25% but see the risks as tilted lower. "

A key question: How accommodative is current policy?  With core PCE inflation at 2.8% year-over-year in September (the data for October and November is delayed due to the government shutdown) and the "neutral rate" at 1.5% would suggest a Fed Funds Rate at around 4.3% (Of course, estimates of the neutral rate vary widely). 

Currently the target Fed Funds rate range is '3-1/2 to 3-3/4' percent.  And the FOMC projections show core PCE inflation only declining to 2.4 to 2.6% by the end of 2026 (Q4-over-Q4).

However, the FOMC believes inflation will come down as the tariff pass-through fades, and also because of a further declines in housing inflation.   Asking rents have been flat for almost three years, and measures of rent (housing / shelter) are steadily declining.

If we look at recent readings over the last 6 months annualized (through September):

PCE Price Index: 2.7% 

Core PCE Prices: 2.7%

Core minus Housing: 2.6%

In Q1 2025, PCE inflation was high.  There might be some residual seasonality in Q1, so it seems likely inflation will be lower in Q1 2026, lowering the YoY measures.

The next FOMC meeting ends on January 28th, and the FOMC will likely hold rates steady at that meeting.  

Due to the ongoing weakness in the labor market, my guess is there will be 2 rate cuts in 2026 with many dissents!  We might even see the 1st ever Fed Chair dissent

As long as the Fed remains independent, FOMC policy will depend on what happens with inflation and employment in 2026.  

HHere are the Ten Economic Questions for 2026 and a few predictions:

• Question #1 for 2026: How much will the economy grow in 2026? Will there be a recession in 2026?

• Question #2 for 2026:  How much will job growth slow in 2026? Or will the economy lose jobs?

• Question #3 for 2026: What will the unemployment rate be in December 2026?

• Question #4 for 2026: What will the participation rate be in December 2026?

• Question #5 for 2026: What will the YoY core inflation rate be in December 2026?

• Question #6 for 2026: What will the Fed Funds rate be in December 2026?

• Question #7 for 2026: How much will wages increase in 2026?

• Question #8 for 2026: How much will Residential investment change in 2026? How about housing starts and new home sales in 2026?

• Question #9 for 2026: What will happen with house prices in 2026?

• Question #10 for 2026: Will inventory increase further in 2026?

Real Estate Newsletter Articles this Week: Economic Questions for 2026

At the Calculated Risk Real Estate Newsletter this week:

Click on graph for larger image.

• Fannie Mae Multi-Family Delinquency Rate Almost to Housing Bust High

• Question #8 for 2026: How much will Residential investment change in 2026? How about housing starts and new home sales in 2026?

• Question #9 for 2026: What will happen with house prices in 2026?

• Question #10 for 2026: Will inventory increase further in 2026?

• Final Look at Housing Markets in November and a Look Ahead to December Sales

This is usually published 4 to 6 times a week and provides more in-depth analysis of the housing market.

Schedule for Week of December 28, 2025

Happy New Year! Wishing you all the best in 2026.

The key economic report this week is the Case-Shiller House Price Index.

----- Monday, December 29th -----
10:00 AM: Pending Home Sales Index for November. The consensus is for a 1.0% increase in the index.

10:30 AM: Dallas Fed Survey of Manufacturing Activity for December. This is the last of regional manufacturing surveys for December.

----- Tuesday, December 30th -----
9:00 AM: FHFA House Price Index for October. This was originally a GSE only repeat sales, however there is also an expanded index. 

9:00 AM ET: S&P/Case-Shiller House Price Index for October.

This graph shows graph shows the Year over year change in the seasonally adjusted National Index, Composite 10 and Composite 20 indexes through the most recent report (the Composite 20 was started in January 2000).

The consensus is for an 1.1% year-over-year increase in the Composite 20 index for October.

9:45 AM: Chicago Purchasing Managers Index for December.

2:00 PM: FOMC Minutes, Meeting of December 9-10

----- Wednesday, December 31st -----
8:30 AM: The initial weekly unemployment claims report will be released. 

----- Thursday, January 1st -----
The NYSE and the NASDAQ will be closed in observance of the New Year’s Day holiday

----- Friday, January 2nd -----
No major economic releases scheduled.

Question #7 for 2026: How much will wages increase in 2026?

Earlier I posted some questions on my blog for next year: Ten Economic Questions for 2026. Some of these questions concern real estate (inventory, house prices, housing starts, new home sales), and I posted thoughts on those in the newsletter (others like GDP and employment will be on this blog).

I'm adding some thoughts and predictions for each question.

Here is a review of the Ten Economic Questions for 2025.

7) Wage Growth: Wage growth was decent in 2025, up 3.5% year-over-year as of November. How much will wages increase in 2026?

The most followed wage indicator is the “Average Hourly Earnings” from the Current Employment Statistics (CES) (aka "Establishment") monthly employment report.

Click on graph for larger image.

The graph shows the nominal year-over-year change in "Average Hourly Earnings" for all private employees.  There was a huge increase at the beginning of the pandemic as lower paid employees were let go, and then the pandemic related spike reversed a year later.

Real wage growth has trended down after peaking at 5.9% YoY in March 2022 and was at 3.5% YoY in November 2025. Although wage growth was close to expectations in November and is trending down.

There are two quarterly sources for earnings data: 1) “Hourly Compensation,” from the BLS’s Productivity and Costs; and 2) the Employment Cost Index which includes wage/salary and benefit compensation. All three data series are different, and most of the focus recently has been the CES series (used in the graph above).

The second graph is from the Atlanta Fed Wage Tracker.   This measure is the year-over-year change in nominal wages for individuals.

By following wage changes for individuals, this removes the demographic composition effects (older workers who are retiring tend to be higher paid, and younger workers just entering the workforce tend to be lower paid).

The Atlanta Fed Wage tracker showed nominal wage growth increased sharply in 2021 and for most of 2022.   In September 2025, the smoothed 3-month average wage growth was at 4.1% year-over-year, down from a peak of 6.7% in July 2022.

NOTE: Due to the government shutdown, the wage tracker has only been updated through September.   It will likely move lower in October and November based on the CES above.

Clearly wage growth has been slowing.  Immigration policy (deportations) might boost wages for some jobs that have been held by undocumented immigrants, but overall I expect to see some further decreases in both the Average hourly earnings from the CES, and in the Atlanta Fed Wage Tracker.  My sense is nominal wages will increase close to low-to-mid 3% range YoY in 2026 according to the CES. Although it is possible that wage growth will increase with a falling participation rate and slower population growth. 

Here are the Ten Economic Questions for 2026 and a few predictions:

• Question #1 for 2026: How much will the economy grow in 2026? Will there be a recession in 2026?

• Question #2 for 2026:  How much will job growth slow in 2026? Or will the economy lose jobs?

• Question #3 for 2026: What will the unemployment rate be in December 2026?

• Question #4 for 2026: What will the participation rate be in December 2026?

• Question #5 for 2026: What will the YoY core inflation rate be in December 2026?

• Question #6 for 2026: What will the Fed Funds rate be in December 2026?

• Question #7 for 2026: How much will wages increase in 2026?

• Question #8 for 2026: How much will Residential investment change in 2026? How about housing starts and new home sales in 2026?

• Question #9 for 2026: What will happen with house prices in 2026?

• Question #10 for 2026: Will inventory increase further in 2026?

Fannie Mae Multi-Family Delinquency Rate Almost to Housing Bust High

Today, in the Calculated Risk Real Estate Newsletter: Fannie Mae Multi-Family Delinquency Rate Almost to Housing Bust High

Excerpt:

Fannie and Freddie: Single Family Delinquency Rate Increased in November

Freddie Mac reported that the Single-Family serious delinquency rate in November was 0.58%, up from 0.56% October. Freddie's rate is up year-over-year from 0.56% in November 2024, however, this is below the pre-pandemic level of 0.60%.

Freddie's serious delinquency rate peaked in February 2010 at 4.20% following the housing bubble and peaked at 3.17% in August 2020 during the pandemic.

Fannie Mae reported that the Single-Family serious delinquency rate in November was 0.58%, up from 0.54% in October. The serious delinquency rate is up year-over-year from 0.53% in November 2024, however, this is below the pre-pandemic lows of 0.65%.

The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59% following the housing bubble and peaked at 3.32% in August 2020 during the pandemic.

There is much more in the article.

Question #8 for 2026: How much will Residential investment change in 2026? How about housing starts and new home sales in 2026?

Today, in the CalculatedRisk Real Estate Newsletter: Question #8 for 2026: How much will Residential investment change in 2026? How about housing starts and new home sales in 2026?

Excerpt:

Earlier I posted some questions on my blog for next year: Ten Economic Questions for 2026. Some of these questions concern real estate (inventory, house prices, housing starts, new home sales), and I’ll post thoughts on those in this newsletter (others like GDP and employment will be on my blog).

I'm adding some thoughts, and maybe some predictions for each question.

Here is a review of the Ten Economic Questions for 2025.

8) Residential Investment: How much will Residential investment (RI) change in 2026? How about housing starts and new home sales in 2026?

First a graph of RI as a percent of Gross Domestic Product (GDP) through Q3 2025:

We don't have the data yet for Q4 2025 yet, but RI as a percent of GDP will likely be down year-over-year.

Happy Holidays and Merry Christmas to All!

Happy Holidays!

Here is a High Sierra webcam (it is snowing!)

Best Wishes to All!

Question #9 for 2026: What will happen with house prices in 2026?

Today, in the CalculatedRisk Real Estate Newsletter: Question #9 for 2026: What will happen with house prices in 2026?

Excerpt:

Earlier I posted some questions on my blog for next year: Ten Economic Questions for 2026. Some of these questions concern real estate (inventory, house prices, housing starts, new home sales), and I’ll post thoughts on those in this newsletter (others like GDP and employment will be on my blog).

I'm adding some thoughts, and maybe some predictions for each question.

Here is a review of the Ten Economic Questions for 2025.

9) House Prices: It appears house prices - as measured by the national repeat sales index (Case-Shiller, FHFA, and Freddie Mac) - will be mostly flat in 2025. What will happen with house prices in 2026?

he following graph shows the year-over-year change through September 2025, in the seasonally adjusted Case-Shiller Composite 10, Composite 20 and National indices (the Composite 20 was started in January 2000). The Case-Shiller Home Price Indices for "September" is a 3-month average of July, August and September closing prices. September closing prices include some contracts signed in May, so there is a significant lag to this data.

The Composite 10 NSA was up 2.0% year-over-year. The Composite 20 NSA was up 1.4% year-over-year. The National index NSA was up 1.3% year-over-year.

There is much more in the article.

Weekly Initial Unemployment Claims Decrease to 214,000

The DOL reported:

In the week ending December 20, the advance figure for seasonally adjusted initial claims was 214,000, a decrease of 10,000 from the previous week's unrevised level of 224,000. The 4-week moving average was 216,750, a decrease of 750 from the previous week's unrevised average of 217,500.
emphasis added

The following graph shows the 4-week moving average of weekly claims since 1971.

Click on graph for larger image.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased to 216,750.

MBA: Mortgage Applications Decrease in Latest Weekly Survey

From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey

ortgage applications decreased 5.0 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending December 19, 2025.

The Market Composite Index, a measure of mortgage loan application volume, decreased 5.0 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 6 percent compared with the previous week. The Refinance Index decreased 6 percent from the previous week and was 110 percent higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 4 percent from one week earlier. The unadjusted Purchase Index decreased 6 percent compared with the previous week and was 16 percent higher than the same week one year ago.

“Overall mortgage application volume fell last week, despite the slight decline in mortgage rates,” said Mike Fratantoni, MBA’s SVP and Chief Economist. “MBA expects the trends of a softening job market, sticky inflation, elevated home inventories, and steady mortgage rates will persist into the new year.”

Added Fratantoni, “Purchase application volume last week was 16 percent higher than a year earlier. We are forecasting continued, modest growth in terms of home sales in 2026.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($806,500 or less) decreased to 6.31 percent from 6.38 percent, with points decreasing to 0.57 from 0.62 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added

Click on graph for larger image.

The first graph shows the MBA mortgage purchase index.

According to the MBA, purchase activity is up 16% year-over-year unadjusted. 

Red is a four-week average (blue is weekly).  

Purchase application activity is still depressed, but solidly above the lows of 2023 and above the lowest levels during the housing bust.  

The second graph shows the refinance index since 1990.

The refinance index increased from the bottom as mortgage rates declined, but is down from the recent peak in September.

Wednesday: Unemployment Claims

Note: Mortgage rates are from MortgageNewsDaily.com and are for top tier scenarios.

Wednesday:
• At 7:00 AM ET, The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

• At 8:30 AM, The initial weekly unemployment claims report will be released.  The consensus is for 225,000 initial claims, up from 224,000 last week.

NOTE: The NYSE and the NASDAQ will close early at 1:00 PM ET.

ICE First Look at Mortgage Performance: Seasonal and Calendar Factors Drive Rise in November Delinquencies

From Intercontinental Exchange: ICE First Look at Mortgage Performance: Seasonal and Calendar Factors Drive Rise in November Delinquencies

Intercontinental Exchange, Inc. (NYSE:ICE) ... today released the November 2025 ICE First Look at mortgage delinquency, foreclosure and prepayment trends.

“While the topline delinquency numbers show a sharp increase, we’ve seen comparable spikes in prior years when November ended on a Sunday and scheduled payments didn’t post until early December,” said Andy Walden, Head of Mortgage and Housing Market Research at ICE. “Overall performance was in line with what historical patterns would suggest. That said, December data will be important to watch to confirm how quickly borrowers recover from this temporary uptick.”

Key takeaways from this month’s findings include:

• Delinquencies rose: The number of past-due mortgages rose by 275,000 from October to 2.3 million in November, pushing the national delinquency rate to 3.85% — the highest level in over four years.

• Inflow of newly delinquent borrowers: 609,000 borrowers who were current on payments in October became delinquent in November, marking the largest single-month inflow since May 2020. Rolls from 30- to 60-day and 60- to 90-day delinquency bands also increased sharply.

• Delinquencies aligned with historical calendar effects: November’s delinquency rate increase was in line with prior years when the month ended on a Sunday, which last occurred in 2014 (+61 bps), 2008 (+112 bps), and 2003 (+57 bps) — all of which exceeded this year’s 50 basis point increase.

• Prepayments declined: After reaching a 3.5-year high in October, prepayment activity retreated in November, falling 18% month over month.

• Foreclosure activity mixed: Foreclosure activity dipped in November due to seasonal and calendar effects. However, foreclosure starts (+25%), sales (+25%) and active foreclosure volumes (+21%) all remain well above last year’s levels.
emphasis added

Click on graph for larger image.

Here is a table from ICE.

Final Look at Housing Markets in November and a Look Ahead to December Sales

Today, in the Calculated Risk Real Estate Newsletter: Final Look at Housing Markets in November and a Look Ahead to December Sales

A brief excerpt:

After the National Association of Realtors® (NAR) releases the monthly existing home sales report, I pick up additional local market data that is reported after the NAR. This is the final look at local markets in November.

There were several key stories for November:

• Sales NSA are down 0.5% YoY through November, and sales last year were the lowest since 1995!

• Sales SAAR (seasonally adjusted annual rate) have bounced around 4 million for the last 3 years.

• Months-of-supply is above pre-pandemic levels.

• The median price is up 1.2% YoY, and with the increases in inventory, some regional areas will see further price declines - and we might see national price declines sometime in 2026.

The median price is up 1.2% YoY, and with the increases in inventory, some regional areas will see further price declines - and we might see national price declines sometime in 2026.

Sales averaged close to 5.42 million SAAR for the month of November in the 2017-2019 period. So, sales are about 24% below pre-pandemic levels.
...
In November, sales in these markets were down 6.5% YoY. Last month, in October, these same markets were up 2.3% year-over-year Not Seasonally Adjusted (NSA). The NAR reported sales were down 7.0% YoY in November, very close to this market sample.

Important: There was one fewer working days in November 2025 (18) as in November 2024 (19). So, the year-over-year change in the headline SA data was more than the change in NSA data (there are other seasonal factors).
...
More local data coming in January for activity in December!

There is much more in the article.

Industrial Production Increased 0.2% in November; Declined 0.1% in October

From the Fed: Industrial Production and Capacity Utilization

This release includes preliminary estimates for industrial production (IP) and capacity utilization for both October and November as well as revised estimates for May through September. IP rose 0.2 percent in November after ticking down 0.1 percent in October. On average, IP rose 0.1 percent per month across October and November, the same as the rate of increase in September and a somewhat slower average pace than the past 12 months. Manufacturing output was flat in November after dropping 0.4 percent in October. There were swings in both mining and utilities output over October and November, though, on net, both sectors posted gains. At 101.8 percent of its 2017 average, total IP in November was 2.5 percent above its year-earlier level. Capacity utilization was 76.0 percent in November, a rate that is 3.5 percentage points below its long-run (1972–2024) average.
emphasis added

Click on graph for larger image.

This graph shows Capacity Utilization. This series is up from the record low set in April 2020, and close to the level in February 2020 (pre-pandemic).

Capacity utilization at 76.0% is 3.5% below the average from 1972 to 2023.  This was close to consensus expectations.

Note: y-axis doesn't start at zero to better show the change.

The second graph shows industrial production since 1967.

Industrial production increased to 101.8. This is at the pre-pandemic level.

Industrial production was close to consensus expectations.

BEA: Real GDP increased at 4.3% Annualized Rate in Q3

From the BEA: Gross Domestic Product, 3rd Quarter 2025 (Initial Estimate) and Corporate Profits (Preliminary)

Real gross domestic product (GDP) increased at an annual rate of 4.3 percent in the third quarter of 2025 (July, August, and September), according to the initial estimate released by the U.S. Bureau of Economic Analysis. In the second quarter, real GDP increased 3.8 percent.

Due to the recent government shutdown, this initial report for the third quarter of 2025 replaces the release of the advance estimate originally scheduled for October 30 and the second estimate originally scheduled for November 26.br />
The increase in real GDP in the third quarter reflected increases in consumer spending, exports, and government spending that were partly offset by a decrease in investment. Imports, which are a subtraction in the calculation of GDP, decreased. ...

Compared to the second quarter, the acceleration in real GDP in the third quarter reflected a smaller decrease in investment, an acceleration in consumer spending, and upturns in exports and government spending. Imports decreased less in the third quarter.

Real final sales to private domestic purchasers, the sum of consumer spending and gross private fixed investment, increased 3.0 percent in the third quarter, compared with an increase of 2.9 percent in the second quarter.

The price index for gross domestic purchases increased 3.4 percent in the third quarter, compared with an increase of 2.0 percent in the second quarter. The personal consumption expenditures (PCE) price index increased 2.8 percent, compared with an increase of 2.1 percent. Excluding food and energy prices, the PCE price index increased 2.9 percent, compared with an increase of 2.6 percent.
emphasis added

PCE increased at a 3.5% annual rate, and residential investment decreased at a 5.1% rate. The initial Q3 GDP report, with 4.3% annualized increase, was above expectations.

Tuesday: GDP, Durable Goods, Industrial Production, Richmond Fed Mfg

From Matthew Graham at Mortgage News Daily: Mortgage Rates Hold Steady to Start Holiday-Shortened Week

Mortgage rates are tied to movement in the bond market and bonds were close enough to Friday's levels that mortgage rates were essentially unchanged today. This keeps the average lender in the lower portion of the narrow range seen over the past 4 months. [30 year fixed 6.24%]
emphasis added

Tuesday:
• At 8:30 AM ET, Durable Goods Orders for November.  The consensus is for a 0.4% increase.

• Also at 8:30 AM: Gross Domestic Product, 3rd Quarter 2025 (Initial Estimate) and Corporate Profits (Preliminary). The consensus is that real GDP increased 3.2% annualized in Q3, down from 3.8% in Q2.

• At 9:15 AM, The Fed will release Industrial Production and Capacity Utilization for October. The consensus is for a 0.1% increase in Industrial Production, and for Capacity Utilization to be unchanged at 75.9%.

• At 10:00 AM, Richmond Fed Survey of Manufacturing Activity for December.

Question #10 for 2026: Will inventory increase further in 2026?

Today, in the CalculatedRisk Real Estate Newsletter: Question #10 for 2026: Will inventory increase further in 2026?

Excerpt:

Earlier I posted some questions on my blog for next year: Ten Economic Questions for 2026. Some of these questions concern real estate (inventory, house prices, housing starts, new home sales), and I’ll post thoughts on those in this newsletter (others like GDP and employment will be on my blog).

I'm adding some thoughts, and maybe some predictions for each question.

Here is a review of the Ten Economic Questions for 2025.

10) Housing Inventory: Housing inventory decreased sharply during the pandemic to record lows in early 2022. Since then, inventory has increased but is still below pre-pandemic levels. Will inventory increase further in 2026?

First, a brief history. Here are a few times when watching existing home inventory helped my analysis.

Starting in January 2005, I was very bearish on housing, but I wasn’t sure when the market would turn. Speculative bubbles can go on and on. However, the increase in existing home inventory in late 2005 (see red arrow on graph below) helped me call the top for house prices in 2006.

There is much more in the article.

Housing December 22nd Weekly Update: Inventory Down 2.3% Week-over-week

Altos reports that active single-family inventory was down 2.3% week-over-week.  Inventory usually declines sharply during the holiday season.

The first graph shows the seasonal pattern for active single-family inventory since 2015.

Click on graph for larger image.

The red line is for 2025.  The black line is for 2019.  

Inventory was up 13.5% compared to the same week in 2024 (last week it was up 13.7%), and down 5.7% compared to the same week in 2019 (last week it was down 5.6%). 

Inventory started 2025 down 22% compared to 2019.  Inventory has closed most of that gap, however inventory will still be below 2019 levels at the end of 2025.

This second inventory graph is courtesy of Altos Research.

As of December 19th, inventory was at 758 thousand (7-day average), compared to 775 thousand the prior week.  

Mike Simonsen discusses this data and much more regularly on YouTube

Sunday Night Futures

Weekend:
• Schedule for Week of December 21, 2025

• Ten Economic Questions for 2026

Monday:
• At 8:30 AM ET, Chicago Fed National Activity Index for November. This is a composite index of other data.

From CNBC: Pre-Market Data and Bloomberg futures S&P 500 are up 21 and DOW futures are up 100 (fair value).

Oil prices were down over the last week with WTI futures at $56.79 per barrel and Brent at $60.76 per barrel. A year ago, WTI was at $70, and Brent was at $73 - so WTI oil prices are down about 19% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.80 per gallon. A year ago, prices were at $3.01 per gallon, so gasoline prices are down $0.21 year-over-year.

Ten Economic Questions for 2026

Here is a review of the Ten Economic Questions for 2025.

Below are my ten questions for 2026 (I've been doing this online every year for 21 years!).  These are just questions; I'll follow up with some thoughts on each of these questions.

The purpose of these questions is to provide a framework of how the U.S. economy will likely perform in 2026, and if there are surprises - like in 2020 with the pandemic - to adjust my thinking.

  

1) Economic growth: Economic growth was probably close to 2% Q4-over-Q4 in 2025.  The FOMC is expecting growth of 2.1% to 2.5% Q4-over-Q4 in 2026. How much will the economy grow in 2026?  Will there be a recession in 2026?

2) Employment: Through November 2025, the economy added 610 thousand jobs in 2025.   How many jobs will be added in 2026?  Or will the economy lose jobs? 

3) Unemployment Rate: The unemployment rate was at 4.6% in November, up from 4.2% in November 2024.   Currently the FOMC is projecting the unemployment rate will decrease to the 4.3% to 4.4% range in Q4 2026.  What will the unemployment rate be in December 2026?

4) Participation Rate: In November 2025, the overall participation rate was at 62.5%, unchanged year-over-year from 62.5% in November 2024, and below the pre-pandemic level of 63.3% in February 2020.   Long term, the BLS is projecting the overall participation rate will decline to 61.1% by 2034 due to demographics.  What will the participation rate be in December 2026?

5) Inflation: Core PCE was up 2.8% YoY through September. This was down from a peak of 5.6% in early 2022.  The FOMC is forecasting the YoY change in core PCE will be in the 2.4% to 2.6% range in Q4 2025. Will the core inflation rate decrease further in 2026, and what will the YoY core inflation rate be in December 2026? 

6) Monetary Policy:  The FOMC cut the federal funds rate three times in 2025 from "4-1/4 to 4-1/2 percent" at the beginning of 2025, to "3-1/2 to 3-3/4" at the end of the year. The mid-range on the "dot plot" suggests many FOMC participants expect around one to two 25 bp rate cuts in 2026.  What will the Fed Funds rate be in December 2026?

7) Wage Growth: Wage growth was decent in 2025, up 3.5% year-over-year as of November.  How much will wages increase in 2026?

8) Residential Investment: How much will Residential investment (RI)  change in 2026?  How about housing starts and new home sales in 2026?

9) House Prices: It appears house prices - as measured by the national repeat sales index (Case-Shiller, FHFA, and Freddie Mac) - will be mostly flat in 2025.  What will happen with house prices in 2026?

10) Housing Inventory: Housing inventory decreased sharply during the pandemic to record lows in early 2022.  Since then, inventory has increased but is still below pre-pandemic levels.  Will inventory increase further in 2026?

Real Estate Newsletter Articles this Week: Existing-Home Sales Increased to 4.13 million SAAR

At the Calculated Risk Real Estate Newsletter this week:

Click on graph for larger image.

• NAR: Existing-Home Sales Increased to 4.13 million SAAR in November

• Lawler: Another Strange NAR Reading on Northeast Median Sales Prices

• Lawler: Early Read on Existing Home Sales in November and Update on Mortgage/MBS Yields and Spreads

• Part 1: Current State of the Housing Market; Overview for mid-December 2025

• Part 2: Current State of the Housing Market; Overview for mid-December 2025

• 3rd Look at Local Housing Markets in November

This is usually published 4 to 6 times a week and provides more in-depth analysis of the housing market.