Over the past two and a half years, we have witnessed increased demand as mortgage rates have climbed from around 6% to over 7% as we enter the second week of January. Despite this, we are still seeing slightly positive year-over-year data.
Here is a breakdown of weekly pending contracts for the last week over the past few years:
- 2025: 252,586
- 2024: 250,621
- 2023: 231,674
Purchase application data
Typically, I refrain from commenting on purchase application data during the last two weeks of the year or the first week of the new year due to the seasonal collapse in volumes. However, prior to the holiday weeks, the data was holding up well despite rising mortgage rates.
Looking back at early 2024 when mortgage rates fluctuated between 6.75% and 7.50%, the purchase application data showed:
- 14 negative prints
- 2 flat prints
- 2 positive prints
Given the current mortgage rate levels approaching those of 2024, it will be important to closely monitor the purchase application data.
10-year yield and mortgage rates
For 2025, my forecast includes:
- A range for mortgage rates between 7.25% – 5.75%
- A range for the 10-year yield between 4.70% – 3.80%
Last week, key data points remained strong, leading to the 10-year yield surpassing my peak forecast for 2025. Mortgage rates, however, are slightly lower than anticipated. This mirrors the situation from last year when mortgage rates reached around 7.50% due to worse spreads.
Continued rise in mortgage rates will depend on strong economic data, especially in the labor market. However, higher rates could impact construction workers due to already low housing starts and permits.
Mortgage spreads
Although current mortgage rates are elevated, the situation could be worse. Improvements in mortgage spreads could lead to lower rates. For my 2025 forecast, I expect an average improvement in spreads compared to 2024.
Weekly housing inventory data
As we enter 2025, we are seeing healthier inventory levels compared to previous years. This improvement is a significant advantage for the current housing market. The key question now is when we will see the traditional increase in inventory during the spring months.
- Weekly inventory change (Jan. 3-Jan. 10): Inventory fell from 635,432 to 624,419
- The same week last year (Jan. 5 – Jan 12): Inventory rose from 499,105 to 505,186
- The all-time inventory bottom was in 2022 at 240,497
- The inventory peak for 2024 was 739,434
- Active listings for the same week in 2015 were 924,813
New listings
New listings data for 2025 is showing growth potential compared to last year. Although we experienced a dip due to the holiday week, there was a healthy bounce back last week.
To return to normalcy, we need to see new listings numbers between 80,000 and 110,000 during the seasonal peak weeks.
- 2025: 44,639
- 2024: 39,640
- 2023: 36,804
Price-cut percentage
On average, about one-third of all homes see a price cut in a typical year. We are currently in a seasonal decline period for price cuts, and monitoring this along with inventory data will be crucial for 2025.
- 2025: 33.9%
- 2024: 32%
- 2023: 36%
The week ahead: Inflation week!
This upcoming week will focus on analyzing the current inflation data, especially with the 10-year yield nearing cycle highs. Retail sales, housing starts, and builder confidence reports will provide valuable insights, particularly in the face of persistent higher mortgage rates.
Monitoring jobless claims data and the Federal Reserve’s response to rising yields will be key factors to watch.
The Federal Reserve’s stance on rising yields will be crucial, as it could impact policy decisions moving forward. Stay updated with our weekly Housing Market Tracker articles for more insights.