10-year yield and mortgage rates
My forecast for 2025 predicted the following ranges:
- Mortgage rates between 5.75% and 7.25%
- The 10-year yield fluctuates between 3.80% and 4.70%
This year, the 10-year yield has ranged from approximately 4.79% to 3.87%, with mortgage rates varying from 7.25% to 6.50%. What can we expect next? If labor data weakens further, the 10-year yield could head towards 3.80% with mortgage rates nearing 6%, but additional economic weakness or a more dovish Fed stance is necessary.
In a recent episode of the HousingWire Daily podcast, I discussed the declining trend in labor data, noting that one of my indicators is signaling a potential recession. The current situation is different from previous years, with completed housing units at historically high levels, suggesting a potential increase in labor decline if demand worsens.
On Friday, the 10-year yield experienced a significant drop, while mortgage rates fell by 12 basis points. The week saw an 18 basis point decrease in mortgage rates.
Mortgage spreads
The improvement in mortgage spreads in 2025 has been beneficial for housing, with potential for further improvement with rate cuts and a dovish Fed tone. The current spread levels are close to the forecasted range, with historical spreads ranging between 1.60% and 1.80%.
Purchase application data
Last week, purchase application data showed a week-to-week decline but a year-over-year gain, influenced by growth in new listings. Continued decrease in mortgage rates could lead to improved weekly data.
Total pending sales
Recent total pending sales data from Altos indicates a shift in housing demand, with potential impact from decreasing mortgage rates.
Weekly pending sales
Weekly pending home sales data provides insights into short-term trends, showing a week-to-week decline but continued year-over-year growth.
Weekly housing inventory data
Recent trends show a slowing growth rate in housing inventory, with potential impact if mortgage rates decrease further.
New listings data
New listings data peaked earlier in the year, with potential for seasonal decline. Monitoring this data line for trends is crucial for understanding market dynamics.
Price-cut percentage
Price-cut percentage data reflects market dynamics, with higher rates and inventory levels contributing to increased price reductions compared to previous years.
The week ahead: ISM & PMI, bond auctions and jobless claims
Looking ahead to the upcoming week, we anticipate ISM and PMI data releases, along with bond auctions and the weekly jobless claims report, which could influence market trends.
Monitoring jobless claims data is crucial for understanding the Federal Reserve’s policy stance, especially in light of recent market volatility. Reflection on the past week’s events can provide valuable insights for the week ahead.