Mortgage spreads
In 2023, mortgage rates hit 8%, leading to new cycle highs in mortgage spreads. Despite initial signs of improvement, the Silicon Valley banking crisis caused a spike in spreads, making 2023 a challenging year. However, in 2024, spreads began to improve, and in 2025, we are only 0.49% away from returning to normal levels. This improvement in spreads, even as bond yields rise, indicates a positive trend in the housing market’s performance without sudden rate shocks.
If spreads were at 2023’s peak levels, mortgage rates would currently be 0.81% higher. Conversely, if spreads returned to their normal range, mortgage rates would be 0.49%-0.69% lower than current levels. Historically, mortgage spreads have ranged between 1.60% and 1.80%. The optimal spread levels would mean mortgage rates at 6.12% to 6.32% today.
10-year yield and mortgage rates
In the 2025 forecast, anticipated ranges include mortgage rates between 5.75% and 7.25% and the 10-year yield fluctuating between 3.80% and 4.70%. Recent events such as inflation reports, discussions about Powell’s future, and Fed Governor Waller’s comments have impacted the 10-year yield, which ended the week at 4.42%. Mortgage rates also saw fluctuations but remained below 7% due to improved spreads, mitigating the impact of higher yields.
Weekly housing inventory data
The growth in housing inventory has been a significant story in 2024 and 2025. While active listings have not fully recovered, they have reached a point where buyers are back in the game. Weekly inventory change shows a positive trend compared to the same week the previous year.
New listings data
New listing data rebounded after the July 4th holidays. The comparison of new listings data from 2024 and 2025 shows a positive trend, indicating stability in the housing market.
Price-cut percentage
Approximately one-third of homes experience price reductions in a typical year, reflecting the dynamic nature of the housing market. Home prices are influenced by factors such as inventory levels and mortgage rates. Recent data shows stabilization in price reductions, aligning with a modest increase in home prices forecasted for 2025.
Purchase application data
Weekly purchase application data shows fluctuations, with positive year-over-year growth numbers outperforming week-to-week data. The data indicates a rebound in the housing market, driven by new listings returning to normal levels.
Weekly pending sales
Weekly pending home sales data provides insights into short-term trends, showing a bounce-back to normal levels after the July 4th holiday. Year-over-year comparisons indicate improvements in pending sales for 2025.
Total pending sales
Latest data on total pending sales from Altos Research indicates trends in housing demand. With mortgage rates around 6%, significant growth in the housing market is expected. Total pending sales data for 2025 shows a slight decrease compared to the previous year.
The week ahead: Home sales data
Anticipating reports on existing and new home sales, with a focus on completed units for sale and jobless claims data. Attention also on potential trade deals as the Aug. 1 deadline approaches.
Stay tuned for updates on the housing market and economic developments as we navigate through the rest of 2025.