Market Update 2.23.26 - Delayed Housing, Inflation and GDP Data Released

Week of February 16, 2026 in Review 

The government has released delayed reports on home construction, home sales, GDP, and the Fed’s preferred inflation measure, PCE, following last fall’s shutdown. Here’s a look at the key highlights. 

• PCE Inflation Higher Than Expected 

• Weather Slows Home Contract Activity 

• Housing Construction Picks Up, But Builders Remain Cautious 

• Quick Take: GDP and Unemployment 

• Family Hack of the Week 

• What to Look for This Week 

• Technical Picture 

PCE Inflation Higher Than Expected   

December Personal Consumption Expenditures (PCE) data showed inflation came in slightly hotter than forecast. Headline inflation rose 0.4% for the month, pushing the annual rate up to 2.9%. Core inflation, which excludes food and energy, also increased 0.4%, bringing the annual core rate to 3%. 

One factor driving inflation? Higher costs for video streaming services, which jumped 19.5% in December, added to monthly price pressures. 

What’s the bottom line? 

The Fed is still balancing risks. Inflation remains above its 2% target, arguing for a cautious approach on rate cuts, while signs of a cooling labor market could increase pressure to ease policy. Fed Chair Jerome Powell has emphasized there’s “no risk-free path.” 

Looking ahead, annual inflation readings could improve in the coming months as higher readings from January (0.31%) and February (0.45%) of 2025 drop out of the 12-month calculation, if new monthly numbers are moderate.   

Weather Slows Home Contract Activity 

Pending Home Sales, which track signed contracts on existing homes, dipped 0.8% from December to January and were 0.4% lower than a year ago. Winter storms likely slowed activity in the South and Northeast, while the West and Midwest saw gains. 

By comparison, signed contracts on new homes hit their best levels in almost four years last November and December. 

What’s the bottom line? 

According to National Association of REALTORS® Chief Economist Lawrence Yun, lower mortgage rates could bring as many as 550,000 additional buyers into the market this year. The challenge: if the number of homes for sale doesn’t grow, that added demand could put upward pressure on prices.

Housing Construction Picks Up, But Builders Remain Cautious

Home construction improved month over month in December. Housing Starts, which measure new homes breaking ground, rose 6.2% from November to an annual pace of 1.404 million. Even so, that’s still 7.3% lower year over year. 

Building Permits, which signal future construction activity, increased 4.3% month over month to a 1.448 million annual pace, though they remain slightly below year-ago levels. 

Despite the uptick, builders remain cautious. The National Association of Home Builders Housing Market Index dipped one point in February to 36. A reading below 50 means more builders view conditions as poor than good. Builders continue to point to affordability concerns and higher construction costs as challenges, although lower mortgage rates have been a positive development. 

What’s the bottom line? 

There still aren’t enough homes available to fully meet buyer demand, and increasing supply is a slow process. Even when construction activity improves, it can take months for new homes to move from permits to completion. That imbalance between supply and demand could keep the market competitive in the months ahead.

Quick Take: GDP and Unemployment  

The first estimate of Q4 2025 GDP showed the U.S. economy grew at an annualized rate of 1.4%, down sharply from 4.4% in Q3. The drop was driven in large part by cuts in government spending during the shutdown.  

Initial jobless claims fell by 23,000 last week to 206,000, though the drop may have been influenced by holiday travel around

Valentine’s and Presidents Day, which can delay filings. Meanwhile, continuing claims rose by 17,000 to 1.869 million. The fact that continuing claims have stayed elevated for some time suggests many unemployed workers are taking longer to find new jobs 

What to Look for This Week   

Home price updates from Case-Shiller and the FHFA are due Tuesday. On Thursday, we’ll get the latest jobless claims report, and Friday brings January’s Producer Price Index, offering a fresh look at wholesale inflation.  

Technical Picture  

Mortgage Bonds ended last week near the upper end of a broad range, finding support at the 25-day Moving Average and facing resistance at 100.38. The 10-year Treasury finished Friday in the middle of its own range, between 4.05% and 4.126%, meaning yields could be whipsawed in either direction.