On the flip side, if spreads were more in line with historical averages, our current mortgage rates could potentially be 0.82% to 0.92% lower. Just imagine the impact – with spreads back to normal levels, we could be looking at mortgage rates below 6%. That would be a game-changer! However, recent trends in the market show that spreads tend to improve when bond yields are higher, but not as much when the 10-year yield is falling. Still, the improvement in spreads since 2023 is crucial for the housing market.
Looking ahead for the rest of the year, I anticipate only a slight improvement in mortgage spreads, around 0.27% to 0.41% below the average level of 2.54% we saw in 2024. We’ve come close to reaching that forecast a few times already this year.
Purchase application data
Year-to-date, purchase application data has been slightly negative but is showing better performance compared to last year. Here is a breakdown of the week-to-week data:
- 2 flat readings
- 3 negative readings
- 2 positive readings
Last week, the weekly data remained flat but was up 3% year over year. Despite some weekly fluctuations, we have seen improvements in year-over-year data for purchase applications in the past weeks. In comparison, last year, when rates were between 6.75% and 7.50%, the purchase application data showed 14 negative, two positive, and two flat readings.
Weekly pending sales
The latest weekly pending contract data from Altos Research provides valuable insights into current housing demand trends. As mortgage rates have risen in 2024 and remained elevated in 2025, there has been a consistent decline in pending sales year over year. While we are still showing higher growth compared to 2023 levels, the housing market tends to perform better when mortgage rates are around 6%.
Weekly pending contracts for the past week over several years:
- 2025: 324,432
- 2024: 337,271
- 2023: 317,190
Weekly housing inventory data
The highlight for housing is the growth in housing inventory from the historically low levels seen in 2022. Despite a slight disappointment with inventory data this year, we are still far from the lows of 2022, especially if mortgage rates decrease towards 6%.
- Weekly inventory change (Feb. 20-Feb. 27): Inventory decreased from 640,221 to 639,485
- The same week last year (Feb. 23-March 1): Inventory increased from 497,657 to 498,339
- The lowest inventory was in 2022 at 240,497
- The peak inventory for 2024 was 739,434
- For comparison, active listings in the same week in 2015 were 962,785
New listings data
The new listing data from Altos Research reflects homes that come to the market without immediate contracts, providing insights into selling pressure in the market. The last two years were the lowest for new listings data in history, and they were not healthy years for the latest listings data either.
Last year, it was projected that we would see at least 80,000 new listings per week during peak months, but that target was not met. This year, the goal is to reach that target. During the housing bubble crash years, new listing data ranged between 250,000 and 400,000 per week. Although last week showed a slight week-to-week decline, it was a bit disappointing.
National new listing data for last week over several years:
- 2025: 53,394
- 2024: 52,189
- 2023: 48,156
Price-cut percentage
In an average year, about one-third of homes typically experience a price cut, reflecting the usual dynamics of the housing market. With increasing inventory and elevated mortgage rates, the price-cut percentage data has been higher compared to periods with lower rates.
For 2025, the forecast indicates home-price growth of 1.77%, suggesting another year of negative real home-price growth. As inventory rises and mortgage rates stay elevated, negative real home-price growth is expected for 2025. The price-cut percentage data has shown an earlier increase this year than in previous years, indicating that the current forecast remains valid. If rates decrease in the future, the weekly data can be revisited.
Price-cut percentages for last week over several years:
- 2025: 33.7%
- 2024: 31%
- 2023: 31%
The week ahead: Jobs Friday Is key
This week is focused on jobs, with the BLS Jobs Friday report taking center stage without the job openings data. The jobless claims data has become more intriguing, especially with a significant spike last week unrelated to federal job losses.
While there will be speeches from Fed presidents, manufacturing data, unit labor cost data, and other reports this week, Jobs Friday will be crucial following a notable decrease in yields. In my experience since late 2022, labor data has always been more significant than inflation data. Whenever there has been a substantial decrease in mortgage rates, it has been accompanied by economic growth or labor concerns, and 2025 is no exception. If the Federal Reserve cuts rates further in the future, it could pave the way for mortgage rates to trend lower towards 6%.