Current Trends in the Housing Market and Mortgage Rates

The mortgage landscape has remained relatively stable thus far in 2025, with rates not dropping below 6.64%. This consistency may indicate potential growth opportunities if rates trend lower towards 6%. While current data presents a more favorable scenario compared to last year, it is important to view these findings within a broader context. Additionally, it typically takes between 30 and 90 days for purchase applications to reflect in sales data.

Pending Sales Analysis

Recent data from Altos regarding weekly pending contracts reveals insights into the housing demand trajectory. Following a decrease in mortgage rates last year, we observed a slight uptick in pending contracts compared to previous years. However, as rates began rising in late 2024 and remained high in 2025, we have witnessed a modest but continuous decline in year-over-year pending sales. While the situation hasn’t worsened, significant improvements remain elusive.

Here are the weekly pending contracts for recent years:

• 2025: 323,456
• 2024: 334,017
• 2023: 314,696

Mortgage Rates and 10-Year Yield Outlook

Looking ahead, the forecast for mortgage rates in 2025 is projected to range between 5.75% and 7.25%, while the 10-year yield may fluctuate between 3.80% and 4.70%. In recent weeks, there has been notable volatility in the 10-year yield, which began around 4.24%, dipped to 4.11% amidst market fluctuations, and then rebounded following affirmations from Federal Reserve Chair Jerome Powell regarding the economy’s robustness. This volatility highlights the interconnected nature of bond yields and mortgage rates.

Previously, it was suggested that a downturn in stock values and weaker economic data would be necessary for bond yields and mortgage rates to decline. Although some notable shifts occurred recently, yields ultimately increased, driven by easing trade war concerns and emerging positive economic indicators.

Improvements in Mortgage Spreads

If not for the enhancements in mortgage spreads throughout 2024 and 2025, the housing market would portray a different picture. Historically, spreads have hovered between 1.60% and 1.80%. If the spreads from 2023 had persisted, mortgage rates would be approximately 0.71% higher today. Conversely, aligning with historical norms could potentially lower current rates by 0.79% to 0.89%. This adjustment would have significant implications, potentially bringing rates below the 6% threshold.

Forecasts indicate that mortgage spreads will only modestly improve this year, projected to remain 0.27% to 0.41% below the average of 2.54% observed in 2024.

Inventory Trends in Housing

A positive development in the housing market is the increase in housing inventory, rebounding from the exceptionally low levels experienced in 2022. Recently, there has been a slight week-over-week increase, signifying the start of seasonal trends in active inventory. As levels approach a more normal state, this could significantly benefit housing dynamics, particularly if mortgage rates decrease, helping to stabilize home prices.

The weekly inventory changes are summarized as follows:

• Current Inventory: Increased from 639,485 to 642,359
• Same Week Last Year: Increased from 498,339 to 500,579
• Inventory Bottom in 2022: 240,497
• Peak Inventory for 2024: 739,434
• Active Listings in 2015: 1,081,867

New Listings Insights

The new listing data, which tracks homes entering the market without immediate contracts, paints a clearer picture of market selling pressure. The past two years have recorded the lowest numbers in this category, contributing to an unhealthy market dynamic. Despite previous disappointments regarding the new listings target of 80,000 per week, there is renewed optimism that this figure may finally be reached in 2025.

National new listing data for the previous week demonstrates a positive shift:

• 2025: 63,858
• 2024: 59,243
• 2023: 50,687

Trends in Price Cuts

In typical years, around one-third of homes experience price reductions, a function of usual housing market behavior. However, in 2025, the price-cut percentage stands at 33.6%, indicating an increase compared to previous years when rates were lower. Projected home price growth is estimated at 1.77%, representing another year of negative real price growth, primarily due to rising inventory levels and sustained high mortgage rates. Current price cut trends suggest an ongoing adjustment in response to market pressures.

Looking Ahead: Upcoming Economic Indicators

The upcoming week is expected to deliver crucial economic data, particularly related to inflation and job openings. These metrics are vital for understanding the current labor market conditions and broader economic health. As the Federal Reserve navigates monetary policy in response to these indicators, the forthcoming job openings data could reveal trends that impact housing and mortgage sectors significantly.

As we move further into 2025, maintaining a close watch on these developments will be essential for stakeholders in the real estate market.