U.S. Economy grew at 3.4% in Q3 2026, outpacing forecasts while housing investment shrank. With private demand running at 4.9% and December rate hike odds near 88%, the boom economy is making housing harder to afford. By Sabastian Niles / Published: Oct 30 2026, 11:15 AM EDT The U.S. economy grew at its fastest quarterly pace since Q3 2025 last week, and the housing sector recorded another quarter of contraction. Those two things happened in the same three months and appear in the same GDP report. Real gross domestic product expanded at a 3.4% annualized rate in the third quarter of 2026, the Bureau of Economic Analysis reported October 29, beating the 3.1% consensus forecast and sharply accelerating from the 2.2% rate posted in the second quarter. The growth was powered by a surge in AI-driven business investment, resilient consumer outlays, and an upturn in government expenditures. Residential construction moved in the opposite direction. Residential fixed investment - the GDP component that tracks homebuilding activity - contracted 3.4% in Q3, reversing a fragile gain from the prior quarter and extending a prolonged soft streak tied to elevated borrowing costs. The advance estimate arrived one day after the Federal Reserve voted 10-2 to keep its benchmark rate at 3.75% to 4.00%, with Governors Lisa Cook and Cleveland Fed President Beth Hammack dissenting in favor of an immediate quarter-point increase. The joint timing of the Fed's hawkish hold and the GDP beat has pulled December's rate decision sharply into focus. CME Group's FedWatch tool placed the probability of a December hike at 87.5% within hours of Thursday's BEA release, up from 73% earlier in the week. The next FOMC meeting is scheduled for December 9. Danielle Hale, chief economist at Realtor.com, had already noted before the GDP data landed that investors appeared to be anticipating two or three more rate increases over the next six to eight months - a pace that exceeds the Fed's own published projections. Thursday's print gave those expectations considerably firmer footing. The internal dynamics of the GDP report help explain why. Real final sales to private domestic purchasers - a measure that strips out inventory swings, trade flows, and government spending to isolate the underlying pulse of consumer and business demand - rose 4.9% in the third quarter, up from 4.6% in the second, according to the BEA. Consumer spending grew 3.8%, matching Q2's pace and its strongest back-to-back reading since late 2024, with gains spread across goods and services. Gross private domestic investment jumped 19.4%, driven by a 20.9% surge in equipment spending attributable largely to AI-linked purchases of computing hardware. The price index for gross domestic purchases slowed meaningfully - rising 3.0% in Q3 against 5.6% in the prior period - while the personal consumption expenditures price index came in at 2.1% and core PCE, excluding food and energy, rose 2.5%. For commercial real estate investors, industrial landlords, and the upper end of the residential market, those fundamentals represent a genuine tailwind. AI-driven capital expenditure is generating measurable demand for data center and logistics space. Affluent consumers spending at a 3.8% quarterly clip sustain the luxury housing tier, where buyers typically finance a smaller share of the purchase price and carry less exposure to the difference between a 6% and a 7.5% mortgage rate. The picture at the entry level is almost the inverse. The 30-year fixed-rate mortgage climbed from approximately 6.6% at the start of the third quarter to around 7.5% by late September, according to Meritage Homes' Q3 earnings disclosures, before settling near 7.35% in the days after the Fed's October hold per Mortgage News Daily. Nationally, housing starts averaged approximately 1.292 million units per month during Q3, down from 1.345 million in Q2, according to Census Bureau data tracked by mortgage analytics firms. Home prices have not collapsed - the Federal Housing Finance Agency reported year-over-year price appreciation of 2.6% as of July 2026 - but the combination of price levels that remain elevated from post-pandemic gains and rates near decade highs has pushed the monthly cost of purchasing a median-priced home well beyond reach for most first-time buyers without significant down payment assistance or a seller-funded rate buydown. Homebuilder earnings this reporting season put real numbers to those pressures. Meritage Homes management told analysts on the company's Q3 earnings call that "throughout Q3, the sales environment became incrementally more challenging as mortgage rates increased from approximately 6.6% at the start of the quarter to 7.5% by September 30," with rate buydown costs becoming a larger drag on margins as the period progressed. The company disclosed a 15% decline in orders and reported home-closing revenue of $1.2 billion, down 17% from a year earlier. D.R. Horton, the largest U.S. homebuilder by volume, separately reported that fiscal fourth-quarter net orders fell 7% and cancellations increased. The National Association of Home Builders noted that builder sentiment had fallen to a 14-year low, weighed by borrowing costs, elevated material and energy prices, and declining buyer traffic - particularly in rate-sensitive markets such as Phoenix, Las Vegas, and Austin that absorbed sharp price appreciation during the post-pandemic run-up. On the resale side, rate lock is suppressing supply as persistently as it is constraining demand. A large share of existing homeowners are sitting on sub-5% mortgages they have little financial incentive to surrender by listing their homes and trading into a 7%-plus loan. The Census Bureau's Housing Vacancy Survey found the national homeownership rate at 65.5% in Q3 2026, a figure that looks stable on paper but masks a market in which prospective buyers and would-be sellers are both largely sidelined. Melissa Cohn, regional vice president at William Raveis Mortgage, said after the October FOMC decision that the Fed appeared to be "watching how the September rate hike affects inflation," adding that the central bank had likely been reluctant to act so close to the midterm elections. With that restraint now behind it, and with Q3 GDP confirming that the economy absorbed September's quarter-point increase without any visible growth slowdown, the internal case for a December move has strengthened substantially. Whether one more 25-basis-point hike would materially shift mortgage rates from here is genuinely uncertain. Long-term rates respond to 10-year Treasury yields, mortgage-backed securities spreads, and inflation expectations as much as they do to the federal funds rate, and some portion of the anticipated December move may already be priced in. Buyers weighing a rate lock should review terms carefully with a licensed mortgage professional, including lock duration and float-down provisions. Borrowers who need help navigating down payment programs and financing options can contact a HUD-approved housing counselor through the agency's toll-free referral line. The BEA's advance estimate carries a standard caveat: revisions from the advance to the second estimate have averaged 0.5 percentage point in absolute terms since 1996. That second estimate - incorporating additional data on trade, inventories, and services alongside third-quarter corporate profits - is scheduled for November 25, 2026. For now, the data offer a consistent picture: the U.S. economy entered the final months of 2026 with private demand running well above trend, an investment boom powered by AI that has little direct connection to residential construction, and a central bank that has both the mandate and the current evidence to tighten further. The housing market, which tends to feel rate changes before the rest of the economy does, has already absorbed that pressure. The question for buyers, builders, and lenders heading into Q4 is whether December's likely rate decision will deepen it. Join the Discussion EDITOR'S PICKS

Meritage Homes Q3 orders drop 15% on constrained affordability. Constrained affordability weighed on consumer sentiment; management expects unpredictable market conditions over the next several quarters. By Lesprom Network 08:46 AM / October 29, 2026 Quick summary. * Meritage Homes' Q3 orders fell 15% year over year as constrained affordability weighed on consumer sentiment U.S. homebuilder Meritage Homes recorded a 15% year-over-year decline in third-quarter orders amid rising mortgage rates, while constrained affordability weighed on consumer sentiment. The company delivered 3,187 homes across 348 communities and generated $1.2 billion in home closing revenue, Meritage Homes Corporation said. The average absorption pace was 3.0 net sales per month per store. The company converted nearly 190% of its backlog during the quarter while focusing on preserving margins instead of pursuing a higher sales pace. Management expects market conditions to remain unpredictable over the next several quarters. The company said prudent capital management and maintaining sufficient liquidity remain priorities in the volatile housing market. Adjusted home closing gross margin was 17.9%, excluding $6.0 million of real estate inventory impairments and terminated land deal walk-away charges. SG&A was 11% of home closing revenue. Land investments fell almost 40% from a year earlier to $329 million. Meritage Homes returned $86 million to shareholders through share repurchases and dividends during the quarter, bringing capital returned during the first nine months of 2026 to nearly $380 million, or 177% of total earnings for the period. The company ended the quarter with $677 million in cash and no borrowings under its revolving credit facility. Its net debt-to-capital ratio was 18.9%, while book value per share increased 4% from a year earlier. Be the first to get key industry news, new trade offers and analytics updates. 1 of 4 newsletters selected.

Meritage Homes stock has a USD 74.78 consensus target. Published on 10/17/2026 at 20:21 | Editorial responsibility: Rafael Müller, Editor-in-Chief AD HOC NEWS Revenue reached USD 1.41 billion in the June 2026 quarter. Meritage Homes stock closed at USD 59.17 on October 16, 2026, down 1.84 percent. Consensus target stays above price. * MarketBeat listed a USD 74.78 consensus target for Meritage Homes on October 10, 2026. * Revenue reached USD 1.41 billion in the second quarter of 2026, down 14.10 percent year over year. * Meritage Homes stock closed at USD 59.17 on the NYSE on October 16, 2026, down 1.84 percent on the day. * Meritage Homes will report third-quarter results on October 29, 2026, with market capitalization at USD 3.9 billion. Meritage Homes stock has a USD 74.78 consensus target, 26.38 percent above the companys USD 59.17 closing price on October 16, 2026, according to MarketBeat on October 10, 2026. The closing price was USD 59.17 on October 16, 2026 at 4:00 p.m. ET, down 1.84 percent on the NYSE. Revenue fell in the second quarter. Meritage Homes reported USD 1.41 billion in revenue for the second quarter of 2026, down 14.10 percent from the year-earlier quarter, while earnings per share came to USD 1.42 versus USD 1.30 consensus, according to MarketBeat on October 10, 2026. The revenue decline gives the valuation discussion a weaker operating backdrop than the earnings comparison alone suggests. Stock sits near its yearly low. The USD 59.17 closing price stood 3.88 percent above the USD 56.66 52-week low and 30.70 percent below the USD 85.38 high on October 16, 2026. Trading volume was 714,340 shares, 13.62 percent below the 827,004-share average. Valuation and October 29 results. Meritage Homes had a market capitalization of USD 3.9 billion, a P/E ratio of 12.38 and a dividend yield of 3.00 percent as of October 16, 2026. The companys investor-relations page lists its third-quarter 2026 earnings call for October 29, 2026 at 8:00 a.m. PT and identifies the second quarter as ended June 30, 2026, according to Meritage Homes. Comparison with peers. Meritage Homes (NYSE, USD): minus 1.84 percent, P/E 12.38, market capitalization USD 3.9 billion D.R. Horton (NYSE, USD): minus 0.11 percent, P/E 13.29, market capitalization USD 39.0 billion Lennar (NYSE, USD): minus 0.79 percent, P/E 14.57, market capitalization USD 18.3 billion The next investor reference point. Meritage Homes closed at USD 59.17 on October 16, 2026 at 4:00 p.m. ET. The next scheduled earnings event is October 29, 2026, giving investors a dated checkpoint for revenue, margins and demand trends. Meritage Homes market facts. * Company: Meritage Homes Corporation * ISIN: US59001A1025 * Ticker: MTH * Primary exchange: NYSE * Price NYSE (as of October 16, 2026, 4:00 p.m. ET): USD 59.17 * Change versus NYSE prior close: minus 1.84 percent * Market capitalization: USD 3.9 billion (as of October 16, 2026) * 52-week range: USD 56.66-85.38 (as of October 16, 2026) * Sector / Industry: Consumer Cyclical / Residential Construction * Next earnings date: October 29, 2026 Sponsored Ad Meritage Homes stock: new analysis - 23 October. Fresh Meritage Homes information released. What's the impact for investors? Our latest independent report examines recent figures and market trends. Disclaimer regarding our articles: This is not investment advice, nor is it a recommendation to buy or sell. Information regarding prices, companies, and markets is provided without guarantee; changes may occur at any time. Stock market transactions can result in significant losses. Our articles are created and reviewed, in whole or in part, automatically with the assistance of AI. en | US59001A1025 | MTH | boerse | 70349842 | bgmi