Housing inventory is on the verge of going negative year over year for the first time in 2026. Despite mortgage rates rising as much as 0.76% from their 2026 lows, demand has held firm, pushing the weekly single-family listings count to just 0.89% above last year's level. Pending home sales showed positive week-to-week and year-over-year growth last week, and new listings are approaching the normal range. The Memorial Day weekend will distort next week's data, but the underlying trend is unmistakable: inventory is not recovering as expected.

The Big Picture

Two forces explain why inventory is flirting with negative year-over-year territory. First, the inventory growth in early 2025 was solid, but it came with higher mortgage rates. Second, when rates dipped below 6.64% and headed toward 6%, demand improved sharply, making year-over-year comparisons very difficult. This will change after June 2026, when the base effects become more favorable.

Despite the potential contraction, the market is in a much healthier position than during 2020-2023, when inventory was extremely low. Home-price growth remains in check, and for the second consecutive year, wages are rising faster than home prices. Last week, inventory rose from 777,913 to 794,286 units, compared to an increase from 767,250 to 787,287 in the same week of 2025.

“Housing inventory is about to turn negative year over year for the first time in 2026, defying expectations of a rapid normalization.”