10-year yield and mortgage rates
In my forecast for 2025, I predicted the following ranges:
- Mortgage rates will fall between 5.75% and 7.25%
- The 10-year yield will fluctuate between 3.80% and 4.70%
Last week, we witnessed a positive trend as the 10-year yield gradually decreased from a high of 4.43% to 4.24%. This decline also led to a slight drop in mortgage rates. While mortgage spreads are still higher compared to previous years, the calmer activity last week provided some relief for those navigating the market’s volatility.
Despite some softer economic data, key indicators like retail sales, durable goods, new home sales, and labor statistics remain stable. This resilience indicates that the more impactful consequences of the trade war have not yet affected the core data points.
As we navigate the complexities of 2025, we are balancing potential declines in economic data with inflationary pressures resulting from supply shortages and rising inflation expectations due to tariffs.
The direction of bond yields and mortgage rates will be dictated by market trends, with optimism that positive developments in the trade war can stabilize the markets. Staying informed on how the markets react to data and headlines will be essential for adapting to the evolving landscape.
Mortgage spreads
Since 2022, mortgage spreads have consistently been above historical norms, worsening notably after the Silicon Valley Bank crisis in 2023. This deterioration contributed to mortgage rates reaching 8% that year. However, from 2024 onwards, improvements in spreads helped lower mortgage rates effectively.
In 2025, spreads have performed better, improving when bond yields rise and mitigating the impact of higher yields. Recent market volatility has caused spreads to widen again, preventing mortgage rates from declining further.
If spreads were as unfavorable as in 2023, mortgage rates would currently be 0.68% higher. Conversely, returning to normal spreads would lead to mortgage rates being 0.62% to 0.82% lower than their current levels. Historically, mortgage spreads should range between 1.60% to 1.80%.
Purchase application data
With the recent increase in mortgage rates, a more significant decline in week-to-week and year-over-year purchase application figures was expected. Despite rates rising from 6.54% to 7.10%, the decrease was less pronounced than anticipated. It will be interesting to see the impact of the slight rate decrease this week.
In recent years, housing data tends to improve when mortgage rates fall from 6.64% to 6%. Therefore, maintaining positive year-over-year purchase application data with rates above this range is a positive sign.
Weekly data for 2025:
- 7 positive readings
- 5 negative readings
- 3 flat prints
Total pending sales
The latest weekly total pending contract data from Altos provides insights into current housing demand trends. While the data has shown positive year-over-year trends, weekly figures have softened, likely influenced by higher rates rather than the Easter holiday.
Weekly pending sales for the last week in recent years:
- 2025: 398,736
- 2024: 398,097
- 2023: 368,113
Weekly housing inventory data
The notable development in the housing market for 2024 and 2025 is the increase in inventory. This growth, essential for a healthier housing market, is a positive step forward. While not yet back to normal levels, progress is being made.
- Weekly inventory change (April 18-April 25): Inventory rose from 719,400 to 731,989
- The same week last year (April 19-April 26): Inventory rose from 542,651 to 556,291
- All-time inventory bottom in 2022 was 240,497
- Inventory peak for 2024 was 739,434
- Active listings for the same week in 2015 were 1,071,283
New listings data
New listings data has faced challenges in recent years but is now showing signs of improvement. Returning to normal levels, where seasonal peaks range between 80,000 and 110,000 per week, is a positive shift.
National new listing data for the last week in previous years:
- 2025: 69,891
- 2024: 72,089
- 2023: 63,236
Price-cut percentage
Approximately one-third of homes undergo price reductions in a typical year, reflecting the dynamic nature of the housing market. Price cuts have increased this year compared to last, aligning with a conservative growth forecast for 2025.
Price cuts from previous weeks in recent years:
- 2025: 35.6%
- 2024: 33%
- 2023: 29%
The week ahead: Jobs and inflation data, plus crazy headlines
This week will bring significant economic data, including reports on jobs, PCE inflation, home prices, and pending home sales. Monitoring how these numbers impact daily decisions and market dynamics is crucial. Stay informed on how the bond market reacts to each report and headline, as they can influence market trends.
Despite some lag in economic data, observing market responses to reports and headlines will be key in navigating the evolving landscape.
Explore all previous Housing Market Tracker articles here.