Several months ago, during an episode of the HousingWire Daily podcast, I made a prediction that price-growth data would slow down in the second half of the year. However, I am surprised to see that pricing has remained strong based on our weekly data. This puts my forecast of 2.33% national home price growth at risk of being too conservative.
Here are the percentages of price cuts for last week compared to the previous few years:
- 2024: 39.5%
- 2023: 39%
- 2022: 43%
10-year yield and mortgage rates
In my 2024 forecast, I included:
- A range for mortgage rates between 7.25%-5.75%
- A range for the 10-year yield between 4.25%-3.21%
There has been a lot of confusion among consumers, mortgage loan officers, and real estate agents in the past five weeks due to the rapid increase in mortgage rates. I recently discussed this on CNBC and in a HousingWire Daily podcast. As we approach jobs week, it’s crucial to monitor the bond market closely to prevent the 10-year yield from surpassing 4.40% and causing mortgage rates to rise.
Mortgage spreads
The mortgage spread situation has been positive in 2024 compared to the negative trends in 2023. Despite a recent spike in mortgage rates leading to a deterioration in spreads, mortgage rates would be significantly higher today without the improvements seen earlier in the year. Normalizing spreads could potentially lower mortgage rates by 0.71%-0.81%.
Weekly pending sales
Real-time demand is reflected in the Altos Research weekly pending contract data, showing growth compared to previous years. While sales are on the rise, it’s important to consider the context of the challenging market conditions in 2022 and 2023. The increase in housing inventory this year can drive sales growth when mortgage rates decline.
Weekly pending sales for last week compared to previous years:
- 2024: 356,127
- 2023: 319,464
- 2022: 339,016
Purchase application data
The positive trend in purchase application data was disrupted by higher rates, resulting in consecutive weeks of decline. Despite low comparisons, last week’s drop almost brought us to flat year-over-year territory. Monitoring purchase applications is crucial, especially with the recent fluctuations in mortgage rates.
Analysis of purchase application data under different mortgage rate scenarios:
- Higher rates: 14 negative prints, 2 flat prints, 2 positive prints
- Lower rates: 12 positive prints, 5 negative prints, 1 flat, 3 straight positive year-over-year growth prints
- Current rates: 2 negative prints, 0 positive weekly prints
It’s essential to consider the impact of mortgage rates on purchase applications and the market’s response to rate changes.
The week ahead: Jobs, inflation, bond auctions, and home prices
Prepare for a data-packed week featuring key economic indicators that can influence bond yields. With jobs week, inflation reports, bond auctions, and national home price data on the horizon, the market is poised for potential volatility. Monitoring the bond market’s reaction to labor reports will be crucial, especially given the recent significant increase in the 10-year yield.