10-year yield and mortgage rates
When looking at my 2025 forecast, I predicted a range for mortgage rates between 7.25%-5.75% and a range for the 10-year yield between 4.70%-3.80%. Currently, the 10-year yield is around 4.60%, indicating little significant movement. We are approaching the upper end of the forecasted ranges for both the 10-year yield and mortgage rates. As we enter jobs week, the significance of labor data for mortgage rates in 2025 is discussed in detail in this article.
In 2024, mortgage rates briefly exceeded 7.25% but mostly stayed within the forecasted range due to improved mortgage spreads.
Mortgage spreads
The improvement in mortgage spreads in 2024 prevented the loss of construction workers due to rising rates. Comparing current spread levels to those in 2023, we could see an additional 0.77% increase in mortgage rates if spreads were worse, or a decrease of approximately 0.76% to 0.86% if spreads were typical.
Weekly housing inventory data
Historically, housing inventory tends to reach its lowest point in March or April, following the COVID pandemic. Last year, inventory hit its lowest in February, so it will be crucial to monitor this closely in 2025.
- Weekly inventory change (Dec. 27-Jan. 3): Inventory decreased from 650,992 to 635,432
- The same week last year (Dec. 29-Jan. 5): Inventory fell from 513,240 to 499,143
- The all-time inventory bottom was in 2022 at 240,497
- The inventory peak for 2024 was 739,434
- Active listings for the same week in 2015 were 959,028
New listings
Anticipating growth in new listings data for 2025, it is expected that the numbers will return to normal after the lows of the past two years. The peak season could see new listings data hitting between 80,000-110,000 per week.
Last week’s holiday affected new listings data, but things are expected to normalize soon. It is advised not to make conclusions based on the last two weeks of the year regarding purchase applications.
New listings data for the past few years:
- 2025: 18,484
- 2024: 35,698
- 2023: 31,995
Price-cut percentage
On average, about one-third of homes see a price cut in a typical year, influenced by mortgage rate movements. Rising rates often lead to more price cuts, while lower rates can stabilize or boost home prices. As we observe a seasonal decline in this data, it will be important to monitor any changes, especially as rates fluctuate.
- 2025: 34.9%
- 2024: 33%
- 2023: 36%
The week ahead: Jobs week, bond auctions and Fed speeches
The upcoming week is packed with events including jobs reports, bond auctions, Global PMI data, Fed minutes release, and speeches from Fed presidents. With the bond market at a crucial level, this week could bring significant developments. Jobless claims data will be closely monitored, especially after a recent decrease.
Get ready for an eventful first week of 2025, as the year is set to unfold with its share of excitement and challenges.