The Fed Is Watching Oil. It Should Be Watching Homes

• There were 1.6 million existing homes for sale in June.

• The number of days on the market keeps rising.

• The median year-over-year sales price rose less than 1%.

While Wall Street panics over oil prices and rate hikes, the housing market is quietly waving a much bigger red flag, that points in the opposite direction…

The year is off to an uneven start for anyone looking to buy a home. Oil is up compared to where it started the year, causing the consumer price index to move farther away from the Federal Reserve’s 2% target. As a result, speculators on Wall Street are betting our central bank may be forced to raise interest rates. The shift means borrowing costs are up, making home purchases increasingly less attractive.

Yet, while investors obsess over the Fed’s next move, they’re not paying attention to the signals in the housing market. Despite a rebound in home sales last month, Redfin still shows the average home sat on the market for 49 days in June. That’s longer than 2025’s 48 days and the slowest turnover since the early COVID period, when the average was 54. That’s a signal that demand continues to cool in what’s typically one of the best-selling months of the year…

The National Association of Realtors (“NAR”) is telling a similar story. Existing home sales fell to an annualized pace of 4.1 million in June. At the same time, the amount of available inventory keeps climbing. More supply paired with softer demand is keeping a lid on prices. And if oil prices head lower, a cool housing market will give our central bank less to worry about. The ability to leave monetary policy on hold should underpin a steady rally in the S&P 500 Index.

But don’t take my word for it, let’s look at what the data is telling us…

Each month, NAR publishes its housing indicators. Existing home sales account for 85%–90% of total volume, making them the cleanest read on market health.

• In June, months’ supply increased to 4.6.

• That surpassed the recent peak of 4.5.

• It also hit the highest level in the last decade.

Prior to the pandemic, supply would shrink as we moved into summer. Instead, it’s going up...

Prices indicate a similar pattern. Realtor.com reports the median listing price per square foot was $228 in June.

• That was down 2.1% year‑over‑year.

• It marked the tenth straight month of annualized declines.

• We haven’t seen a streak like that since mid‑2023.

The shift is hurting sellers’ ability to command a premium.

Sale prices confirm the softness. NAR shows the median price of an existing home sold in May was just over $440,000.

• That was up 0.4% from last year.

• That’s weaker than typical seasonality going back to 2018.

• It also marks eight straight months of annualized growth at 3% or less.

We haven’t experienced a stretch like this since mid‑2023. Put simply, the housing market hasn’t looked this soft since the Fed was still hiking…

Bottom line: inventory is behaving exactly as it does in a soft market. It’s keeping a lid on price growth. An improving but still weak job market and a Fed on hold are bringing more inventory to market while keeping would‑be buyers on the sidelines.

Housing carries real weight in the inflation calculus. It accounts for roughly 35% of CPI and about 17% of PCE. When home prices cool, rental pricing power tends to follow. That pulls down owners’ equivalent rent, one of the most influential components in both CPI and PCE.

Elevated supply should keep that pressure moving in the right direction. It will help tame inflation over the coming year and improve the chances for added rate cuts next year. That easing cushion remains a quiet tailwind for a steady S&P 500 rally as the year progresses.

Five Stories Moving the Market:

Iran said its interior minister, Eskandar Momeni, would travel to Pakistan to meet with mediators; Pakistan and Qatar, the main intermediaries in the conflict, see a return to U.S.-Iran positions prior to July 9 as a first step in a peace deal – Bloomberg. (Why you should care – mediators are said to have proposed a 10-day ceasefire)

Israeli intelligence believes Iran moved thousands of uranium-enrichment centrifuges into tunnels deep inside a mountain last fall, according to Israeli and U.S. officials; Israel passed along the intelligence findings to the U.S., saying the centrifuges were transferred to the Pickaxe Mountain site last fall after the 12-day war in June when American and Israeli strikes pummeled Iran’s three main nuclear sites – WSJ. (Why you should care – such a development could increase concerns that Iran could restart its nuclear enrichment program)

Google is developing a new server chip that would incorporate elements of its Gemini model directly ​into the hardware, in a bid to serve ‌its AI models more efficiently to users; the company expects the new ​chip, informally dubbed "Frozen v2," to help address an AI ​computing capacity crunch – Reuters. (Why you should care – the efforts to rethink AI chip development points to the continued capacity constraints for compute power)

Hedge funds pulled back from U.S. tech stocks at a record pace over the past two months, according to the Goldman Sachs Group Prime Brokerage unit; the cumulative reduction in market value totaled about 10% - Bloomberg. (Why you should care – Goldman noted this was the largest such net selling of stocks in the sector since it began tracking data 10 years ago)

OpenAI and Anthropic executives are sounding the alarm about the rise of cheap AI, particularly powerful new models produced in China, suggesting they will lead to a “dystopian” AI future and present unacceptable security risks without regulation – WSJ. (Why you should care – while the U.S. may push for tighter controls on the U.S. of Chinese models, this could also spur the rise of domestic alternatives)

Economic Calendar:

Earnings: ALLY, CB, COF, DHI, DHR, EQT, GM, HAL, MMM, NVS, SCHW

U.K. – Average Earnings for May (2 a.m.)

U.K. – Employment Change for May (2 a.m.)

U.K. – Public Sector Net Cash Requirement for June (2 a.m.)

ECB Bank Lending Survey (4 a.m.)

Germany – ZEW Economic Sentiment for July (5 a.m.)

ECB’s Nagel (Germany) Speaks (7:30 a.m.)

U.S. – ADP Employment Change Weekly (8:15 a.m.)

Treasury Auctions $95 Billion in 6-Week Bills (11:30 a.m.)

U.S. - American Petroleum Institute Crude Oil Inventory Data (4:30 p.m.)

Japan – Exports, Imports for June (7:50 p.m.)