Economic Outlook – Despite higher-than-expected inflation, Treasury bond yields fell sharply this week as investors shifted their focus from inflation concerns to growing uncertainty about the economy and the stock market. The 10-year Treasury yield, which had climbed above 5.3% last week, dropped to approximately 5.1%, its largest weekly decline since February. Much of the decline was driven by a selloff in technology and artificial intelligence-related stocks, as investors questioned whether the enormous investments being made in AI infrastructure would generate sufficient returns, particularly with borrowing costs remaining elevated. Investors moved money out of stocks and into the relative safety of U.S. Treasury bonds, pushing bond prices higher and yields lower. Comments from Federal Reserve officials suggesting that additional interest rate increases may not be necessary immediately also helped bring yields down. For the housing market, declining Treasury yields are encouraging because mortgage rates generally follow the direction of the 10-year Treasury. If yields continue to decline, lower mortgage rates could help improve affordability, bring more buyers into the market, and strengthen home sales in the months ahead.

Mortgage rates – Every Thursday, Freddie Mac publishes interest rates based on a survey of mortgage lenders throughout the week. The Freddie Mac Primary Mortgage Survey reported that mortgage rates for the most popular loan products as of October 15, 2026, were as follows: The 30-year fixed mortgage rate was 7.4%, unchanged from 7.4% last week. The 15-year fixed was 6.71%, nearly unchanged from 6.73% last week. Rates dropped on Thursday and Friday. If the rates at the end of the week hold, the 30-year should be closer to 7.25% on next Thursday’s report.

The graph below shows the trajectory of mortgage rates over the past year.

Inflation Rises in September as Energy Prices Surge – The Bureau of Labor Statistics reported that the Consumer Price Index (CPI) rose 0.6%month-over-month in September, bringing the annual inflation rate to 3.7% in September. That is up from an annual inflation rate of 3.4% in August. Core CPI, which excludes volatile food and energy prices, increased 0.3% for the month. It was up 2.6% year over year, up from a 2.4% year-over-year increase in August. Analysts commented that much of the increase was driven by higher energy costs, particularly gasoline prices, which jumped 9.1% in September. The report highlights renewed inflationary pressures that could complicate the Federal Reserve’s interest rate decisions and keep borrowing costs, including mortgage rates, elevated.

U.S. Treasury Bonds – The 10-year treasury bond closed the week yielding 5.09%, down sharply from 5.24% last week. The 30-year treasury bond yield ended the week at 5.43% , down sharply from 5.60% last week. We watch bond yields because mortgage rates follow bond yields.

Stock Markets – The Dow Jones Industrial Average closed the week at 52,002.41, up 0.7% from 51,654.95 last week. It is up 8.2% year-to-date from 48,063.29 on December 31, 2025. The S&P 500 closed the week at 7,659.44, down 1.9% from 7,811.54 last week. The S&P is up 11.9% year-to-date from 6,845.50 on December 31, 2025. The Nasdaq closed the week at 26,140.03 , down 4.5% from 27,366.17 last week. It is up 12.5% year-to-date from 23,241.99 on December 31, 2025.

Existing home sales are released by the third week of the month for the previous month by the California Association of Realtors and the National Association of Realtors. The National Association of Realtors has released its report. The California Association of Realtors has not. We will include that report in next week’s update.

September U.S. Existing-Home Sales increase despite higher rates – The National Association of Realtors reported that existing-home sales, which include single-family homes, townhomes, condominiums, and co-ops , increased 1.5% month-over-month in September, reaching a seasonally adjusted annual rate of 3.99 million homes. Year-over-year, sales were down 2.2% compared to September 2025. The median price paid for an existing home was $417,500, down 2.7% from $429,100 in August, but up 1.3% from $412,300 one year ago, marking the 39th consecutive month of year-over-year price increases. Housing inventory increased to 1.60 million homes for sale at the end of September, up 1.9% from August and up 4.6% from one year ago. At the current sales pace, unsold inventory represented a 4.8-month supply, unchanged from August but up from 4.5 months in September 2025. First-time buyers accounted for 31% of all existing-home sales in September, up from 30% in August and one year ago. All-cash transactions represented 27% of sales, unchanged from August but down from 30% last September. Individual investors and second-home buyers accounted for 20% of purchases, a significant increase from 15% in both August and September 2025. Distressed sales, including foreclosures and short sales, remained historically low at just 2% of all transactions, unchanged from both the previous month and one year ago.