Market Update - August 21, 2026

Friday, August 21, 2026

This Market Update is written by our Capital Market specialists each week to bring you insight into what's happening in the market and how it may affect mortgage rates and real estate trends.

Rates are provided by Mortgage News Daily. The MND Rate Index is the best way to follow day-to-day movement in mortgage rates. The index is driven by real-time changes in actual lender rate sheets. This has two huge advantages, timeliness and accuracy. A "top tier" scenario is used as a baseline (75 LTV, 780 FICO, etc.). We use proprietary methodology to adjust the rate to account for points. ***That can mean that lenders are quoting 6.125 with points while our index is at 6.25, hypothetically.***

Market Commentary:

Mortgage rates showed stabilization over the past week, hovering near four-week lows following recent inflation and retail sales data. While lower rates brought as light bump in refinancing activity, purchase demand remains constrained by seasonal slowing and broader inventory dynamics. Total mortgage application volume edged down 0.4% week-over-week. Purchase applications dropped 2.0%, as elevated borrowing costs continue to temper homebuyer urgency. Refinance applications gained 1.5%, making up nearly 42% of overall application activity as rates briefly hit monthly lows.

Economic & Housing Drivers

Weaker-than-expected retail sales gave bond markets a brief boost, though rates consolidated into the end of the week. The FOMC remains on pause at 3.50%–3.75%. Bond markets are carefully watching upcoming employment, and inflation prints to gauge potential rate cuts later this year. The MBS Highway Housing Index dropped 5 points to 27 in August, reflecting seasonal momentum loss and buyer price sensitivity. However, close to 48% of survey respondents nationwide now classify their local environment as a buyer's market notably in the Sunbelt and Southwest, giving buyers unprecedented room to negotiate.

A chart titled “A Quick Look Back,” summarizing key U.S. economic events from August 14 to August 20, 2026. The table includes Event Date, Event Name, Actual Data, Forecast, Previous Data, and Commentary. On August 14, U.S. Retail Sales for July fell 0.6% month-over-month, significantly weaker than the forecast for a 0.1% increase and down from the previous month’s 0.2% gain. Total retail sales declined to $763.6 billion, marking the first monthly decrease in nine months. The drop was partly attributed to the timing of major online sales events that shifted some consumer spending into June. On August 18, Pending Home Sales for July declined 2.3% month-over-month, falling well short of the forecast for a 0.3% increase but improving from the previous month’s 5.4% decline. Pending sales were also down 2.2% compared with a year earlier and reached their lowest level since January 2026, reflecting continued softness in housing market activity. On August 19, U.S. commercial crude oil inventories increased by 4.405 million barrels for the week ending August 14, contrary to expectations for a 0.6 million barrel decline. Total commercial crude inventories rose to 428.8 million barrels, marking the third consecutive weekly increase and signaling a larger-than-expected buildup in oil supplies. On August 20, Initial Jobless Claims for the week ending August 15 fell to 206,000, below the forecast of 210,000 and down from the previous week’s 209,000. The lower-than-expected level of claims suggested that layoffs remained relatively contained. Overall, the week’s economic data showed weaker consumer spending and housing activity, an unexpected increase in crude oil inventories, and continued resilience in the labor market as jobless claims edged lower.

FedWatch: Target rate (in bps) possibilities, according to the CME Group (as of 08/20/2026– 12:00 PM EST):

Top House Hacking Cities for 2026

‍Flat Conditions for Custom Home Building – Eye On Housing

K-Shaped Economy In Practice: One Segment Stalls While The Other Keeps Climbing

Homeowners Use Credit Cards Too Often When a Better Financial Lifeline Is Available

US Home Prices Rise 2.6% In A Show of 'Surprising Durability'

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Inventory Indicator

The business sector has been liquidating physical inventories for five straight quarters. If companies were expecting future inflation, they would be building inventories to avert further cost increases —not to mention capturing the IVA revaluation in earnings. Conversely, in 2021 and 2022, corporations sharply boosted inventories for six straight quarters. That should have been a cue at the time that the inflation burst was not destined to be “transitory”. - Elliot Eisenberg, Economist

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News You Can Use:

· Why US home prices aren't falling despite a sluggish market

· The mortgage myth keeping middle-income renters on the sidelines

· Fed minutes July 2026: Officials saw need for rate hike if inflation doesn't cool

· Cleveland Fed survey: businesses expect inflation to ease, investment to weaken over the coming year

· Bill To Double Capital Gains Tax Exclusion Picks Up Momentum in Congress

· Pending Home Sales Retreat in July as Mortgage Rates Hit 2026 High

· Housing starts tumble as rate pressure squeezes builders

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*Communication is intended for Industry Professionals only and not intended for Consumer Distribution

Interest rate and annual percentage rate (APR) are based on current market conditions as of 08/20/2026, are for informational purposes only, are subject to change without notice and may be subject to pricing add-ons related to property type, loan amount, loan-to-value, credit score and other variables. Estimated closing costs used in the APR calculation are assumed to be paid by the borrower at closing. If the closing costs are financed, the loan, APR and payment amounts will be higher. Contact us for details. Additional loan programs may be available. Accuracy is not guaranteed, and all products may not be available in all borrower's geographical areas and are based on their individual situation. This is not a credit decision or a commitment to lend. Actual interest rate, APR, and payment may vary based on the specific terms of the loan selected, verification of information, your credit history, the location and type of property, and other factors as determined by Prosperity Home Mortgage, LLC. Not available in all states. Rate is as of 08/20/2026 and is subject to change at any time without notice. Opinions, estimates, forecasts, and other views contained in this document are those of Freddie Mac’s economists and other researchers, do not necessarily represent the views of Freddie Mac or its management, and should not be construed as indicating Freddie Mac’s business prospects or expected results. Although the authors attempt to provide reliable, useful information, they do not guarantee that the information or other content in this document is accurate, current, or suitable for any particular purpose. All content is subject to change without notice. All content is provided on an “as is” basis, with no warranties of any kind whatsoever. Information from this document may be used with proper attribution.

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Friday, August 21, 2026