The impact of rising rates on demand data growth has been historically significant. As rates move higher, demand data growth tends to slow down.
10-year yield and mortgage rates
My forecast for 2024 includes:
- A range for mortgage rates between 7.25%-5.75%
- A range for the 10-year yield between 4.25%-3.21%
Channeling ranges with mortgage rates and the 10-year yield allows us to track important economic data together and identify crucial inflection points with rates. The relationship between the 10-year yield and 30-year mortgage rates is a topic I frequently discuss.
I have identified a critical threshold for the 10-year yield at around 3.80%. We would need weaker economic data to push the yield below this level. While we saw a softening in the labor market with the latest jobs data, other recent data releases have exceeded expectations. More details on this can be found in the HousingWire Daily podcast.
Recent positive economic indicators such as retail sales and jobless claims have pushed the 10-year yield to 4.08% by the end of last week.
Mortgage spreads
In 2024, the story of mortgage spreads has been positive compared to the negative trend in 2023. Despite a recent spike in mortgage rates, spreads have slightly worsened. However, if we compare the current spreads to those of last year, mortgage rates would be 0.72% higher today. Returning spreads to normal levels could lower mortgage rates by 0.71% – 0.81%.
Weekly housing inventory data
Recent weeks have seen varying trends in inventory growth. While we experienced the best week of inventory growth in 2024 five weeks ago, the growth has been impacted by external factors such as hurricanes on the East Coast. Despite some fluctuations, last week saw a positive growth of 7,024 homes in inventory.
- Weekly inventory change (Oct 11-Oct. 18): Inventory rose from 732,410 to 739,434
- The same week last year (Oct. 12-Oct. 19): Inventory rose from 546,450 to 554,350
- The all-time inventory bottom was in 2022 at 240,497
- The yearly inventory peak for 2024 is 739,434
- For context, active listings for this week in 2015 were 1,171,775
New listings data
The trend in new listings data for 2024 has been positive, although falling slightly short of the minimum target. Despite not reaching the target, 2024 showed improvement compared to the lowest level in 2023.
- 2024: 60,361
- 2023: 56,772
- 2022: 57,762
Price-cut percentage
The percentage of homes receiving price cuts has been influenced by mortgage rate movements. Higher rates have led to an increase in price cuts, especially with rising inventory levels. However, recent rate decreases have tempered the price-cut percentage.
While I anticipated a cooling in price growth data in the second half of the year, the current data is below 2022 levels. Monitoring how higher mortgage rates impact this metric will be crucial as we approach the seasonal downtrend in inventory.
Price-cut percentages for last week compared to previous years:
- 2024: 39.5%
- 2023: 38%
- 2022: 43%
The week ahead: Fed speeches and home sales data
This week, we can expect more speeches from Fed presidents along with existing home and new home sales data. It’s important to note that recent housing starts data and upcoming sales reports may not fully reflect the impact of higher mortgage rates. Keeping a close eye on our weekly housing data will provide insights into how these rates have affected purchase application data. I discussed this in a recent segment on CNBC, emphasizing the need for sustained rate levels around 6% to stimulate sales from their current depressed state.