10-year yield and mortgage rates
My forecast for 2025 predicted the following ranges:
- Mortgage rates: 5.75% to 7.25%
- 10-year yield: 3.80% to 4.70%
Last week saw a positive trend with the 10-year yield decreasing from 4.43% to 4.24%, leading to a slight drop in mortgage rates. While mortgage spreads are still elevated compared to 2025 figures, the recent calm in the market is a relief for those navigating the fluctuations. Despite softer economic data, key indicators like retail sales and labor statistics remain stable, suggesting resilience against trade war impacts.
Market trends will determine the direction of bond yields and mortgage rates, with optimism that positive news on the trade war front can stabilize the markets. Staying informed on market reactions to data and headlines will help navigate the changing landscape.
Mortgage spreads
Mortgage spreads have been elevated above historical norms since 2022, worsened by the Silicon Valley Bank crisis in 2023. However, improvements in spreads in 2024 helped lower mortgage rates. Recent market volatility has widened spreads, preventing mortgage rates from decreasing further. If spreads returned to normal levels, mortgage rates could see a significant decrease.
Historically, mortgage spreads should range between 1.60%-1.80%.
Purchase application data
Despite rising mortgage rates, purchase application data has remained positive year over year, with a mix of positive, negative, and flat readings weekly. The housing market tends to improve when mortgage rates fall, indicating resilience against rate increases.
Total pending sales
Weekly total pending sales data shows positive year-over-year trends, indicating strong housing demand. Despite recent cooling, the market remains slightly positive, impacted by higher mortgage rates.
Weekly housing inventory data
Housing inventory has increased, signaling a healthier market. While not yet at normal levels, progress is being made towards a more balanced market.
New listings data
New listings data is showing a promising shift, with an increase in listings compared to previous years. While experiencing some decline, the market is moving towards normal levels.
Price-cut percentage
Price cuts have increased compared to previous years, aligning with conservative growth forecasts for 2025. Market adjustments are being made as inventory levels rise and mortgage rates increase.
The week ahead: Jobs and inflation data, plus crazy headlines
This week will bring significant economic data on jobs, inflation, and home sales. Monitoring market reactions to reports and headlines is crucial in navigating the evolving landscape.
Stay informed and follow the latest Housing Market Tracker articles for updates.