Published on Feb 20, 2026
After months of waiting due to last fall’s government shutdown, several major economic reports have finally been released. We now have updated data on inflation, home sales, construction activity, and overall economic growth. While the numbers are mixed, they offer important insight into where mortgage rates and housing conditions may head next.
For buyers and homeowners in El Dorado Hills, Rocklin, and Citrus Heights, understanding these shifts isn’t just academic. These trends influence affordability, competition, and the timing of your next move. At Pacific National Lending, we believe informed borrowers make stronger financial decisions, so let’s break this down clearly.
The Federal Reserve’s preferred inflation gauge — the Personal Consumption Expenditures (PCE) index — showed that December inflation was slightly stronger than economists expected.
Headline inflation rose 0.4% for the month, pushing the annual rate up to 2.9%. Core inflation, which removes food and energy prices to give a clearer picture of long-term trends, also rose 0.4% for the month and now sits at 3% annually.
One surprising contributor? Streaming services. Subscription costs jumped nearly 20% in December, adding unexpected upward pressure to the monthly data.
So what does this mean?
Inflation remains above the Fed’s 2% target, which argues for caution when it comes to cutting rates too aggressively. At the same time, other economic indicators show the labor market cooling — something that typically supports easier policy.
Fed Chair Jerome Powell has consistently said there is “no risk-free path” forward. In plain terms, the Fed is trying to reduce inflation without weakening the economy too much.
The encouraging part? Some of last year’s higher inflation readings will soon drop out of the annual calculation. If monthly inflation numbers remain moderate in early 2026, the year-over-year rate could begin to look more favorable.
For homeowners in El Dorado Hills, where jumbo financing is common, inflation trends matter because larger loan balances are more sensitive to rate movement. In Rocklin, where growing families are actively moving within the community, steady inflation supports predictable mortgage pricing. And in Citrus Heights, where affordability remains key, any improvement in inflation helps stabilize borrowing costs.
Pending Home Sales, which measure signed contracts on existing homes, dipped slightly from December to January and came in marginally lower than a year ago.
Winter storms across parts of the country likely slowed buyer activity, particularly in regions hit hardest by severe weather. Meanwhile, some areas saw modest gains, showing that demand hasn’t disappeared — it simply paused in certain regions.
New home contract activity tells a slightly different story. Late last year, signed contracts on new construction homes reached their strongest pace in nearly four years.
The broader takeaway is this: demand remains present, but timing and inventory levels are influencing activity more than pure affordability.
According to the National Association of REALTORS®, if mortgage rates ease further, as many as 550,000 additional buyers could re-enter the market this year. That’s a significant number.
The challenge is supply. If inventory does not grow alongside demand, competition could intensify quickly.
For buyers in Rocklin and Citrus Heights, where resale inventory can tighten fast in spring markets, preparation is critical. In El Dorado Hills, where luxury and semi-custom homes dominate, low inventory combined with returning demand could put upward pressure on prices again.
Housing construction showed improvement month over month in December. Housing Starts rose over 6%, signaling more homes breaking ground compared to November. Building Permits also increased, suggesting additional projects may be on the way.
However, year-over-year comparisons tell a more cautious story. Both housing starts and permits remain below last year’s levels.
Builder confidence also dipped slightly. The National Association of Home Builders Housing Market Index remains below the neutral 50 mark, meaning more builders view conditions as challenging rather than strong.
Builders continue to cite affordability concerns and construction costs as ongoing obstacles. While lower mortgage rates have helped demand, high material costs and cautious buyer behavior remain factors.
For markets like Rocklin, where new subdivisions contribute significantly to supply, slower construction growth can limit options for buyers. In El Dorado Hills, where new development is often higher-end and more customized, longer build timelines may keep available inventory tight. In Citrus Heights, where most inventory is resale, construction slowdowns elsewhere can shift more buyers into the resale market.
Even when construction increases, it takes months for permits to translate into completed homes. That time lag means supply shortages don’t correct overnight.
The first estimate of fourth-quarter GDP showed the economy grew at a 1.4% annualized rate, a sharp slowdown from the 4.4% growth seen in the third quarter.
Much of that decline stemmed from reduced government spending during the shutdown period. While slower GDP growth isn’t necessarily alarming, it reinforces the theme of moderation across the broader economy.
Slower growth often reduces inflation pressure over time, which can benefit mortgage markets.
Initial jobless claims dropped slightly last week, though holiday timing may have influenced that number. Continuing claims, however, increased and have remained elevated for some time.
When continuing claims stay high, it typically indicates workers are taking longer to secure new employment.
This dynamic reinforces the balancing act facing policymakers: inflation remains above target, but employment trends show signs of cooling.
For mortgage borrowers, a cooling labor market often supports a friendlier interest rate environment — even if improvements come gradually.
Here’s the practical summary:
Inflation is still slightly elevated but may improve in coming months
Buyer demand remains present but sensitive to rates and inventory
Construction is improving but not enough to eliminate supply shortages
Economic growth has slowed, which can reduce rate pressure
Labor data suggests moderation rather than recession
For buyers in Citrus Heights, modest rate stability could improve purchasing power compared to last year’s highs. In Rocklin, families planning a move should prepare early before spring competition increases. In El Dorado Hills, where higher loan amounts magnify rate changes, strategic financing can make a substantial long-term difference.
The housing market does not move in straight lines. When rates improve, demand often returns quickly. When inventory is limited, competition follows.
At Pacific National Lending, we focus on preparation rather than prediction. We help buyers and homeowners across El Dorado Hills, Rocklin, and Citrus Heights understand:
Current rate scenarios
Loan program options (Conventional, FHA, VA, Jumbo)
Down payment strategies
Refinance opportunities
How to structure financing to match long-term goals
We are a mortgage brokerage, not a bank. That means we work with multiple lending partners to find the solution that fits your needs — not just one lender’s offerings.
The latest delayed reports confirm what many borrowers already feel: the market is stabilizing, not spiraling. Inflation remains elevated but manageable. Construction is improving but slow. Demand is present but measured.
For buyers and homeowners in El Dorado Hills, Rocklin, and Citrus Heights, the coming months could present opportunity — especially for those who are prepared before the market shifts again.
If you’re considering buying, refinancing, or simply want clarity about where rates stand today, Pacific National Lending is here to help you build a smart plan.
Because in this market, preparation beats prediction every time.
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