On the flip side, if spreads were more in line with historical averages, our current mortgage rates could be significantly lower, ranging from 0.82% to 0.92%. Just picture this – if spreads returned to normal levels today, we could potentially see mortgage rates drop below 6%. What a game-changer that would be! However, it’s worth noting that in the current market environment, spreads have been improving when bond yields are on the rise, but not as much when the 10-year yield is falling. Nevertheless, the improvement in spreads since 2023 remains crucial for the housing market.
Looking ahead for the remainder of the year, I anticipate only a modest improvement in mortgage spreads, around 0.27% to 0.41% below the average level of 2.54% seen in 2024. We have come close to reaching that forecast on several occasions this year.
Purchase application data
Thus far this year, purchase application data has shown a slight negative trend but is performing better compared to last year. Here is the week-to-week year-to-date data:
- 2 flat readings
- 3 negative readings
- 2 positive readings
Last week, the weekly data remained flat but showed a 3% increase year over year. Despite some weekly fluctuations, we have seen improved year-over-year data in the past few weeks. Contrastingly, during the same period last year, with rates between 6.75% and 7.50%, purchase application data displayed 14 negative, two positive, and two flat readings.
Weekly pending sales
The latest weekly pending contract data from Altos Research provides valuable insights into current housing demand trends. As mortgage rates have risen in late 2024 and remained high in 2025, there has been a consistent decline in pending sales year over year. While we are still seeing higher growth compared to 2023 levels, the overall trend is declining. The housing market typically performs better when mortgage rates are around 6%, indicating room for improvement as we approach the spring season.
Weekly pending contracts for the past week over several years:
- 2025: 324,432
- 2024: 337,271
- 2023: 317,190
Weekly housing inventory data
The highlight for the housing market is the growth in housing inventory from the historically low levels witnessed in 2022. Although there was a slight decrease in inventory last week, a seasonal increase is expected shortly. Despite some disappointment in inventory data this year, the positive note is that we are far from the lows of 2022, especially if mortgage rates decline towards the 6% mark.
- Weekly inventory change (Feb. 20-Feb. 27): Inventory dropped from 640,221 to 639,485
- The same week last year (Feb. 23-March 1): Inventory increased from 497,657 to 498,339
- The lowest inventory point was in 2022 at 240,497
- The peak inventory for 2024 was 739,434
- For comparison, active listings for the same week in 2015 were 962,785
New listings data
The new listing data from Altos Research reflects homes entering the market without an immediate contract, providing insight into selling pressure in the market. The last two years saw record-low new listings data, indicating challenges in the market. Despite a mild decline last week, it is anticipated that we will reach a target of at least 80,000 new listings per week during peak months this year.
National new listing data for the past week over several years:
- 2025: 53,394
- 2024: 52,189
- 2023: 48,156
Price-cut percentage
In an average year, about one-third of homes experience a price cut, reflecting typical market dynamics. As inventory grows and mortgage rates remain high, the price-cut percentage data has been elevated compared to periods with lower rates. Forecasts for 2025 suggest negative real home-price growth amid increasing inventory and elevated mortgage rates.
Price-cut percentages for the past week over several years:
- 2025: 33.7%
- 2024: 31%
- 2023: 31%
The week ahead: Jobs Friday Is key
This week, the focus will be on Jobs Friday, with the BLS Jobs report taking center stage. Jobless claims data has been intriguing, especially with a recent spike unrelated to federal job losses. In addition to Jobs Friday, there will be speeches from Fed presidents, manufacturing data, unit labor cost data, and more reports to monitor. The labor market continues to be a key driver for mortgage rate trends, with economic growth playing a significant role. The potential for a 1% cut by the Federal Reserve in the future could pave the way for mortgage rates to trend lower towards 6%.