Inflation Ticks Higher, Housing Activity Mixed, and Growth Slows

Published on Feb 26, 2026

What It Means for Buyers in Rocklin, El Dorado Hills, and Citrus Heights

After months of waiting on delayed economic reports, we finally received updated data on inflation, housing activity, GDP, and employment. The numbers delivered a mixed message: inflation came in slightly hotter than expected, home contract activity slowed in some regions, construction improved modestly, and economic growth cooled compared to late last year.

For buyers and homeowners in Rocklin, El Dorado Hills, and Citrus Heights, these updates matter because they influence mortgage rate trends, affordability, and overall housing competition. At Pacific National Lending, we stay focused on how national data translates into local opportunity. Here’s what the latest reports are really telling us.

Inflation Runs Warmer Than Forecast

December’s Personal Consumption Expenditures (PCE) report — the Federal Reserve’s preferred inflation measure — showed prices rising 0.4% for the month. That pushed annual inflation up to 2.9%. Core PCE, which strips out food and energy, also climbed 0.4%, bringing its annual rate to 3%.

That’s slightly above what economists were expecting.

One surprising contributor? A sharp increase in video streaming costs, which jumped nearly 20% in a single month. While that might seem like a small detail, categories like that can meaningfully impact monthly inflation readings.

So what does this mean?

The Federal Reserve remains in a delicate position. Inflation is still above its 2% target, which argues for caution before cutting rates further. At the same time, there are growing signs that the labor market is cooling — which typically supports rate relief.

Fed Chair Jerome Powell has repeatedly emphasized that there is “no risk-free path” forward. In other words, every policy decision comes with trade-offs.

Looking ahead, there is some potential for improvement. Higher monthly inflation readings from early 2025 will eventually fall out of the 12-month calculation. If upcoming monthly numbers stay moderate, annual inflation could begin trending lower again.

For buyers in Rocklin, even modest improvements in inflation data can help stabilize mortgage rates, which is critical in a competitive suburban market. In El Dorado Hills, where higher home values often require larger loan amounts, even small rate shifts can significantly affect monthly payments. And in Citrus Heights, where many first-time and move-up buyers are active, rate stability can expand affordability.

Winter Weather Slows Contract Activity

Pending Home Sales — which track signed contracts on existing homes — slipped 0.8% from December to January and were slightly lower compared to a year ago.

Winter storms likely played a role in dampening activity in several parts of the country. Meanwhile, certain regions actually posted gains.

It’s also important to note that new home contract activity had previously reached its strongest levels in nearly four years late last fall, when mortgage rates were easing.

The broader takeaway? Activity has slowed, but not collapsed.

National Association of REALTORS® economists suggest that if mortgage rates remain favorable, hundreds of thousands of additional buyers could re-enter the market this year. The challenge is supply. If new listings don’t increase meaningfully, stronger demand could put upward pressure on prices.

For buyers in Rocklin, where newer communities and school districts drive demand, limited inventory can quickly intensify competition. In El Dorado Hills, where many homeowners hold long-term, tight resale supply can create upward price pressure. In Citrus Heights, steady demand combined with modest inventory levels may keep the market active heading into spring.

Construction Improves, But Builders Stay Cautious

Housing construction showed signs of life. Housing Starts rose more than 6% month over month in December. Building Permits — a leading indicator of future construction — also moved higher.

That sounds encouraging. However, both metrics remain below year-ago levels.

Builder confidence remains subdued. The Housing Market Index dipped slightly and remains below the level that signals expansion. Builders continue citing affordability challenges, elevated construction costs, and cautious buyers.

Even when construction increases, it takes time. Homes must move through permitting, foundation work, framing, and final completion before they hit the market.

That lag matters.

For buyers in Rocklin, where new developments play a large role in available inventory, construction timelines can shape how quickly supply expands. In El Dorado Hills, where larger custom homes are common, extended build cycles can delay meaningful inventory growth. And in Citrus Heights, where existing homes dominate the market, new construction may not immediately relieve supply constraints.

The imbalance between supply and demand remains a key factor supporting home values.

Economic Growth Slows in Q4

The first estimate of fourth-quarter GDP showed the economy growing at a 1.4% annualized pace — a sharp slowdown from the previous quarter’s 4.4% expansion.

Part of the decline was tied to reduced government spending during the shutdown. Consumer activity remained positive but moderated.

Slower GDP growth isn’t necessarily negative for mortgage markets. In fact, cooler growth can ease inflation pressures and support bond markets — which can benefit mortgage rates over time.

For homeowners in Rocklin, El Dorado Hills, and Citrus Heights, slower growth combined with moderating inflation may create a more favorable borrowing environment compared to the volatility of prior years.

Unemployment Data Shows Mixed Signals

Initial jobless claims declined modestly, suggesting layoffs are not accelerating dramatically. However, continuing claims — which measure how long people remain unemployed — moved higher and have stayed elevated for months.

That tells us something important: hiring is softer than it once was. While companies may not be aggressively cutting jobs, displaced workers are taking longer to find new employment.

This “low-fire, low-hire” environment supports the view that the labor market is cooling gradually rather than sharply.

From a mortgage perspective, labor softness can increase the probability of stable or easing rate policy if inflation cooperates.

What This Means for Rocklin, El Dorado Hills, and Citrus Heights

Here’s the simplified takeaway:

Inflation came in slightly higher than expected, but long-term improvement is still possible.
Housing contracts dipped modestly, likely influenced by winter factors.
Construction activity improved, though supply remains tight.
Economic growth slowed in the fourth quarter.
The labor market is cooling gradually, not collapsing.

For buyers in Rocklin, preparation is key before spring competition intensifies. In El Dorado Hills, monitoring rate movements can significantly impact affordability due to larger average loan sizes. In Citrus Heights, improving mortgage stability may bring more first-time buyers back into the market.

Why Work With Pacific National Lending

At Pacific National Lending, we are a mortgage brokerage — not a bank. That means we shop multiple lending partners to find competitive options tailored to your situation.

We help clients in Rocklin, El Dorado Hills, and Citrus Heights with:

Conventional, FHA, VA, and Jumbo loans
First-time buyer strategies
Down payment assistance programs
Refinance evaluations
Self-employed and complex income scenarios

Our role is to help you understand what today’s data means for your specific goals — not just the headlines.

Looking Ahead

Upcoming reports on home prices, wholesale inflation, and jobless claims will provide further insight into the direction of rates and housing activity.

Mortgage bonds remain rangebound, and Treasury yields could move in either direction depending on new data. That means flexibility and preparation matter more than ever.

If you’re planning to buy, refinance, or simply want clarity on how these economic trends affect you in Rocklin, El Dorado Hills, or Citrus Heights, Pacific National Lending is here to help you navigate the market with confidence.

The numbers may shift week to week — but smart preparation always wins.