Forecast for 10-Year Yield and Mortgage Rates
In my 2025 prediction, I projected the following ranges:
- Mortgage rates: 5.75% – 7.25%
- 10-year yield: 3.80% – 4.70%
Recently, I discussed the impact of Godzilla tariffs on the 10-year yield, which should ideally be at 4.35% without such tariffs. Despite economic uncertainties due to the ongoing trade war, the 10-year yield has remained stable. President Trump’s call for lower rates reflects concerns about economic disruptions. Positive economic data last week led to a rise in the 10-year yield and mortgage rates.
Analysis of Mortgage Spreads
While mortgage spreads have improved since 2023, recent market volatility has impacted them negatively. If spreads return to normal levels, mortgage rates could potentially decrease by 0.94% to 1.14%. Historically, mortgage spreads should range between 1.60% – 1.80%.
Insights from Purchase Application Data
Despite rising mortgage rates, purchase application data has shown positive year-over-year growth for 13 consecutive weeks. While the growth rate is slowing, it remains impressive. Monitoring upcoming data releases will provide further insights into this trend.
Weekly data for 2025:
- 7 positive readings
- 6 negative readings
- 3 flat prints
Analysis of Total Pending Sales
Recent data on total pending sales indicates positive trends in housing demand. Despite higher rates, demand has remained strong, highlighting the potential for growth if rates stabilize around 6%.
Analysis of Weekly Housing Inventory
The increase in housing inventory in 2024 and 2025 is a positive development for the market’s long-term health. Recent data shows a significant rise in inventory levels, which is essential for a balanced market.
Analysis of New Listings Data
New listings data has shown positive growth in 2025, indicating a return to normal market conditions. The increase in new listings is essential for maintaining a healthy housing market.
Analysis of Price Cut Percentage
Price cuts have increased in 2025 compared to previous years, reflecting market dynamics influenced by inventory levels and mortgage rates. A conservative growth forecast for home prices in 2025 aligns with the current trend of price adjustments.
Preview of the Week Ahead
This week’s focus includes global PMI data, bond auctions, and speeches by Fed officials. Insights from these events will provide valuable information on managing economic challenges, particularly related to the trade war. Monitoring jobless claims data and purchase application trends will offer further insights into the housing market.
Despite ongoing economic uncertainties, the housing market continues to show resilience, with positive trends in various key indicators.