2026 Half-Time Score

Since I have been in your inbox every Friday since January telling you what this market was doing and where it was going, it feels right to stop and give you an honest half-time report before we talk about what the second half looks like.

I will keep this short because the back half is where shit gets interesting.

The First Half in Three Sentences

A war started on February 28th and changed everything. Rates spiked, confidence collapsed, and the market split into micromarkets where some homes flew and others sat untouched on the same street. The buyers who moved anyway - who responded to their own economic reality instead of the headlines - built equity while everyone else waited for an all-clear that still hasn't officially come.

That is six months in three sentences. You were there. You don’t need me to rehash all the gory details.

The unsung hero of 2026: Mortgage Spreads

Before we look at the second half, I want to spend a minute on something I covered a while back that deserves more attention than it is getting right now.

Mortgage spreads.

The spread between the 10-year Treasury yield and the 30-year fixed mortgage rate closed last week at 2.0%. Historically, that spread has ranged from 1.60% to 1.80%.  In September of 2022, the spread widened past three percentage points -the widest since 1986. This happened when the Fed began QT and started shedding MBS, combined with rapid rate hikes. You might remember this because 30-year rates went over 7% even though the 10-year wasn't nearly that high. Here is what that number means in practice: if we had the worst spread levels of 2022 and 2023, mortgage rates would be between 7.5 and 8% right now. 

The reason mortgage rates have stayed below 7% this year - through a war, through oil at $115, through PCE at 4.1%, through the most hawkish Fed first meeting in recent memory - is not luck. It is because mortgage spreads have been better behaved than at any point during the post-pandemic rate surge. This is the number one reason housing data has held up in 2026. And it is almost never mentioned in the mainstream real estate conversation.

Why does this matter for the second half? Because spreads have room to improve further. Historically we are still about 20 to 34 basis points above normal spread levels. As the peace deal holds, as oil continues to fall, as the geopolitical risk premium comes out of the bond market - those spreads should continue to compress. And when they do, mortgage rates fall even if the Fed does nothing.

You do not need a rate cut to get rate relief. That’ what I want you to take away from today’s economic lesson.

What the Second Half Actually Looks Like

Here is where the expert consensus lands as we head into July. I am going to give you the honest version, not the optimistic one.

The 30-year fixed is expected to hover around 6.4% to 6.5% for the month of July - a predictable, stable environment for making big financial decisions. Not dramatically lower. Not dramatically higher. The tug-of-war between a peace deal pulling rates down and sticky inflation holding them up is producing exactly the kind of stability that smart buyers have been waiting for.

HousingWire's Logan Mohtashami, a big voice amongst housing analysts, put the second half framework plainly: the rest of 2026 hinges on whether demand stays positive with mortgage rates near 6.60% and tighter year-over-year comparisons starting in July. How do we know if demand is staying positive? Watch pending sales, purchase applications, inventory, new listings, and of course price cuts.

On inventory: national inventory has increased but the structural housing deficit has not disappeared. The housing stock is simply not large enough given the size of the population. That deficit remains a major constraint on affordability - which means prices are unlikely to fall in any meaningful way even as the market softens in certain regions.

On new homes: one of the more interesting dynamics heading into the second half is that the median resale home price is actually more expensive than the median price of a newly built home right now. That has only happened two or three times in the last few decades. Builder incentives, price cuts, and the geography of new construction have created a situation where buying new might actually be the better play for first time homebuyers.

On geography: Texas and Florida are cooling due to cyclical overbuilding and elevated rates, while Midwest markets like Columbus, Indianapolis, and Kansas City are showing outsized growth. Close to major universities, more affordable, and with strong job bases - these are the markets to watch if you are an investor or a relocating buyer in the second half.  I’m not investing in the Midwest personally, but all of my rental properties are near UNR so this makes a lot of sense to me.

And on the buyer pool - here is the number that I want every fence-sitter reading this to absorb.

A one percentage point drop in mortgage rates expands the pool of households who can qualify to buy by approximately 5.5 million people - including about 1.6 million renters who could become first-time buyers. About 10% of those households typically act. That translates to roughly 500,000 additional families competing for a limited supply of homes for sale.

We are currently about 40 to 50 basis points above where rates were at the start of this year. If spreads normalize and the peace deal holds and the July PCE data shows the inflation peak we are expecting -we do not need a full point of rate improvement to unlock meaningful demand. We need half of that. And half of that is entirely plausible in the second half.

Lawrence Yun Said It. I'm Just the Messenger.

NAR's chief economist - who does not exactly have a reputation for reckless optimism - said this week about the second half of 2026:

"Home prices are in no danger of any major decline."

Not a realtor. Not a mortgage lender with a vested interest. The chief economist of the National Association of Realtors, who has access to more real estate transaction data than almost anyone in the country…looked at wage growth, inventory levels, equity positions, and the structural housing deficit and said prices are not falling in any meaningful way.

Do with that information what you will my friends.